Tuesday, August 16

MELD’s $ 1B ISPO Highlights Emerging Use Cases for Cardano and Cryptocurrency Fundraising


The DeFi MELD banking protocol made headlines recently for attracting more than $ 1 billion in Cardano (ADA) with participation in its protocol through a novel funding mechanism called an initial offering of participation, or ISPO, which marks a major innovation in the way early adopters support blockchain startups. Cointelegraph had the opportunity to connect with MELD CEO Ken Olling to discuss the importance of ISPO, as well as Cardano’s role in facilitating large-scale stakeholder engagement.

ISPO: an overview

ISPO is a novel way for investors and other early adopters to support a project by delegating cryptocurrencies to public interest groups in exchange for project tokens. MELD is currently the only known project employing an ISPO even though the concept had previously been proposed elsewhere.

The MELD ISPO, which started on July 1, allowed Cardano holders to stake their ADA for any duration and amount in exchange for MELD tokens. The first pool of participation was completed within 24 hours of the ADA contribution of approximately $ 100 million. In five days, four interest groups equivalent to nearly $ 200 million were filled.

MELD stopped accepting new delegations on October 27. By then, nearly 620 million ADAs had been wagered for a cumulative value of more than $ 1 billion. All that said, ISPO had more than 40,000 participants. MELD also raised $ 10 million in revenue.

The ISPO was a significant departure from previous crypto funding initiatives, most notably the initial coin offering (ICO) and security token offering (STO), and it was a nod to the growing Cardano ecosystem. He also highlighted the pent-up demand in the market for DeFi projects, which continue to attract investor interest.

Blockchain projects raised billions of dollars in funding in 2017 and 2018 before regulatory crackdowns and a brutal cryptocurrency bear market ended the mania. Source: 3TS Capital

Why Cardano?

Of all the proof-of-stake (PoS) chains out there, MELD selected Cardano for its ISPO for its lower transaction costs, attractive mechanism of stake, and overall architecture, according to CEO Ken Olling. During MELD’s initial development phase in mid-2020, Cardano was perceived to be the best option considering the circumstances surrounding Ethereum (ETH) at the time.

“There are no more established blockchains,” Olling told Cointelegraph, adding:

“One of our requirements was a modern PoS blockchain. The only real option at the time was Cardano. You have Solana, who has a much more complex two-level gameplay when it comes to the blockchain. It also operates legally in a different way. And then you have other PoS blockchains, but none of them really provided the full picture or the full package. “

Related: How Solana and Cardano are breaking new ground for NFT’s growth

Olling said his firm remains “very optimistic” about Cardano’s future despite its recent struggles. ADA’s performance has lagged considerably in recent months after being one of the best in the cryptocurrency market through September.

Achieve financial efficiency

In essence, MELD offers non-custodial banking services, allowing users to lend and borrow with crypto and fiat currencies, as well as stake their MELD tokens for interest. Lenders can deposit both cryptocurrencies and fiat currency on the platform. Borrowers have the ability to borrow on both types of assets after posting their crypto as collateral.

The crypto collateral option is attractive to investors because it means they can borrow fiat money to cover their expenses without having to sell their digital assets and therefore incur a capital gains penalty. (Capital gains taxes are a source of consternation for crypto investors, as large bag owners are always looking for ways to use their new wealth as efficiently as possible.)

When asked what differentiates MELD from others cryptocurrency loans and lending platforms, Olling identified two factors: first, “at the highest level, we offer transparency,” he said. “It’s on the blockchain, so what happens to the funds in the protocol is completely open source, unlike centralized cryptocurrency lending and lending services.”

Second, and on a more practical level, MELD offers “users fiat currencies for their crypto-backed loans, while others […] DeFi’s competitors can only offer other cryptocurrencies. ”

Related: DeFi May Be 100 Times Bigger Than Today In 5 Years

Cryptocurrency lending has become one of the largest use cases within DeFi, with companies like Aave and Compound achieving more than $ 14 billion and $ 11 billion in total locked value (TVL), respectively. More than two dozen other protocols have accomplished a TVL of at least $ 100 million, according to industry data.

Although the emergence of DeFi has presented something of a threat to the traditional financial system, the growth of the industry has been largely driven by users who already have access to legacy banking systems. That appears to be slowly changing as crypto entrepreneurs target the vast unbanked and underbanked populations of the world in search of financial inclusion. According to Olling, financial inclusion is a by-product of a more efficient financial system that is made possible by DeFi.