Better than Yesterday #31: Node Sale - New Form of Fundraising
A node is a crucial component in maintaining a blockchain network, ensuring security and decentralization by verifying transactions before adding them to the blockchain. Node operators are rewarded for performing this task.
Previously, running a node wasn't very common due to limited profit potential compared to the resources required for infrastructure and project expenses. However, running a node is becoming a new trend due to significant profits and minimal infrastructure requirements.
Projects have started using node sales as a means of fundraising, with many successful case studies like XAI Games and Aethir. So, what is a node sale and why has this fundraising method been so successful?
What is a Node Sale?
A node sale is a sale of keys to operate project nodes. These projects allocate a large portion of the token supply to reward node operators, creating significant profit opportunities.
Nodes are sold in price tiers, with earlier purchases receiving lower tiers at lower prices and vice versa. This has fueled FOMO (fear of missing out) among the crowd, leading to rapid sellouts of these node sales.
XAI Games successfully sold 34,000 nodes, raising over 13,000 ETH in 3 months, while Aethir sold over 73,800 nodes, raising 41,370 ETH in just 1 month.
How does the Node Reward work?
The Node Reward will follow these mechanisms
Based on X% of supply for node rewards allocated by the project.
Additional rates are allocated based on rewards from the performance of operating beneficial network nodes, shared from Network fees or increased Stake levels.
Usually rewards will be paid over time and most projects lock rewards before they can be received. (usually will be locked for a period of 90-180 days).
Launching this node-selling model, GALA has been a very successful project.
Those participating in the Node round have profited from $1,000 → $100,000; however, this only applies to those who purchase in the first 20,000 nodes batch. And after that batch, the breakeven rate will be extremely long and risky.
Fast forward to this cycle, XAI kicked off the node sale meta, along with the increasing participation of different projects such as Hytopia, Aethir, Sophon, Tabi, Carv, Myria, AlienX.
Here are some ongoing sales:
XAI (Tier 18) = $761M FDV
Hytopia (Tier 8) = $800M FDV
Aethir (Tier 53) = $4.8B FDV
Sophon (Tier 8) = $600M FDV
How & When Will You Break Even On The Investment?
The breakeven formula is simple.
[Cost of Node] ÷ [Node Rewards Per Month Per Node]
In which:
Node costs depend on the level of participation; the earlier you join the level, the cheaper it is.
Node rewards can be calculated as:
[node reward ratio] / [Number of active nodes]
Most projects allocate 5-20% of supply to node rewards, so node runners will earn more with fewer active nodes, but based on the typical sales structure, more quantities are sold in earlier tiers; on average, about 66% of nodes are sold.
All users who participated in buying nodes in Tier 1 can achieve early profits, and participants in other tiers significantly reduced their payback time with Airdrop activities.
However, the risk rate will be greater when the user participates in higher-tier node positions. At the current stage, most tier nodes being sold have high valuations, and break-even times are very long.
In general, the Node Sale model brings many positive aspects as well as the long-term sustainability of the project, however users will need to carefully calculate the risk and breakeven time when participating in this fundrasing model.
🔔 Let's wrap up everything else on the pros & cons in part 2 of Better than Yesterday with BSCS about Node Sale! Stay tuned!
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