DeFi banking protocol MELD recently made headlines by raising over $ 1 billion in ADA stakes to its minutes through a new funding mechanism known as the Initial Stake Pool Offering (ISPO).
Overview of ISPO
ISPO is a new way for investors and other early adopters to support a project by delegating cryptocurrency to a public investment pool in exchange for project tokens. MELD is currently the only known project that ISPO uses, although the concept has already been proposed in other projects.
MELD’s ISPO began on July 1st and enabled Cardano holders to use their ADA for any length and amount in exchange for MELD tokens. The first equity pool was filled within 24 hours of adding $ 100 million to ADA. Four investment pools worth nearly $ 200 million were filled within five days.
MELD stopped accepting new permits on October 27th. At this point, nearly 620 million ADAs with a cumulative value of more than $ 1 billion have been staked. ISPO has more than 40,000 participants. MELD also had sales of $ 10 million.
ISPO is a significant departure from previous crypto funding initiatives, particularly ICOs and STOs, and a highlight for Cardano’s growing ecosystem. It also shows the need to catch up in the market for DeFi projects, which continues to attract the interest of investors.
Blockchain projects raised billions of dollars in 2017 and 2018 before regulatory raids and bear markets ended the mania. | Source: 3TS Capital
According to CEO Ken Olling, MELD selected Cardano from all existing proof-of-stake (PoS) chains for its ISPO because of its lower transaction costs, attractive staking mechanism and overall architecture.
In the initial phase of MELD development in mid-2020, Cardano was considered the best choice given the Ethereum-related circumstances at the time.
“There are no longer any established blockchains. One of our requirements is a modern PoS blockchain. The only real option at the time was Cardano. You have Solana, which has a much more complex, two-tier staking engine that involves blockchain. It also works differently from a legal point of view. And then there are other PoS blockchains, but none of them really give the complete picture or the association, ”emphasized Ken Olling.
Olling said MELD remains “very optimistic” about Cardano’s future despite the recent price war. ADA’s performance has lagged significantly in recent months after becoming one of the top performing crypto markets in September.
Achieve financial performance
At its core, MELD offers unsecured banking services that allow users to loan and borrow both crypto and fiat, as well as wagering their MELD tokens for interest. Lenders can deposit both crypto and fiat on the platform. Borrowers have the option to borrow either type after depositing their cryptocurrency as collateral.
The crypto security option is attractive to investors as they can borrow fiat to cover their costs without having to sell their digital assets and thus pay a capital gains penalty. (Capital gains taxes are a cause for concern for crypto investors as high net worth investors always strive to use their newly earned wealth as efficiently as possible.)
When asked what sets MELD apart from other crypto lending and lending platforms, Olling identified two factors:
- First: “We ensure transparency at the highest level. It’s on the blockchain, so what happens to the money on the log, unlike centralized crypto credit and lending services, is completely open-source.
- Second, and on a more practical level, MELD is offering users “fiat currency through their crypto-backed loans while other DeFi competitors can only offer other cryptocurrencies”.
Cryptocurrency lending has become one of the biggest use cases in DeFi, with Aave and Compound totaling over $ 14 billion and $ 11 billion (TVL), respectively. More than 20 other protocols have achieved a TVL of at least $ 100 million.
Although the advent of DeFi posed some sort of threat to the traditional financial system, the growth of the industry has mainly been driven by users who already have access to banking systems. That seems to be slowly changing as crypto entrepreneurs worldwide target the low / no bank account for financial inclusion. According to Olling, financial inclusion is a by-product of a more efficient financial system made possible by DeFi.
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According to Cointelegraph