WHAT IS A NODE SALE? WILL THIS NEW FORM OF FUNDRAISING REPLACE TOKEN PUBLIC SALES?

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. For example, XAI Games, a Layer 3 Game project on Arbitrum, allocated up to 50% of its token supply to reward node operators, along with airdropping over 1 million XAI tokens to node buyers as gratitude for early support.

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.

Can Node Sale Replace Token Public Sale?

Node sales undeniably offer superior capital efficiency and benefits for investors compared to traditional token sales. With attractive rewards, projects can attract more node operators, making the network more decentralized, secure, and sustainable to serve the project's long-term vision.

Node sales also reduce the pressure to sell tokens during the Token Generation Event (TGE), as most tokens allocated for node operator rewards are locked for several months before circulating.

Moreover, while it's almost a rule in the crypto market that projects shouldn't sell more tokens in public sales than in private sales, this doesn't apply to node sales. Projects conducting public node sales can raise significantly more capital than in private rounds without creating excessive selling pressure at TGE.

So, the big question is whether node sales can completely replace token public sales to become the most effective community fundraising trend. The answer is both yes and no. Essentially, only projects requiring new nodes can conduct node sales to serve their infrastructure needs. DApp projects or DeFi protocols surely won't be able to sell nodes. Despite the clear advantages of node sales, they may not entirely replace token public sales because traditional token sales offer more diversity, easier participation, and don't require complex procedures or technological platforms.