It’s Not a Token Offering, It’s a ‘Node Sale’: Sophon Blockchain Raises $60M

As a seasoned crypto investor with a keen interest in blockchain technology and its applications in various industries, I find the recent node sale of Sophon, an entertainment-focused blockchain ecosystem, intriguing. The project’s successful fundraising round, which raised over $60 million, is an example of this new and increasingly popular form of project financing.

In the realm of blockchain technology, a new trend is emerging, not concerning technical advancements per se, but rather effective ways to amass investments from financiers.

As a blockchain analyst, I’ve noticed that Sophon, which specializes in the entertainment industry, has successfully raised over $60 million through a node sale. Node sales represent an innovative approach to financing projects that is gaining popularity within crypto communities as traditional token sales face increased regulatory scrutiny from securities regulators.

As a crypto investor, I’ve heard from a reliable source that a significant number of nodes in the network might have been acquired by venture capital firms.

As a researcher studying the Sophon network, I’d like to highlight that the financial implications of running a node on this project are explicitly mentioned in their press release. Contrary to popular belief, the network doesn’t necessarily require all 200,000 nodes to function optimally. Users aren’t obligated to personally manage these nodes either.

In the press release, it is stated that “they can easily assign tasks and enjoy the benefits,” while any unwanted or unused node licenses from the sale will not be released for use but instead will be destroyed.

Using Celestia for data availability

Previously, Sophon managed to secure a funding amount of $10 million through a conventional investment round. This round was spearheaded by Paper Ventures and Maven 11, with additional investments coming from Spartan, SevenX, and OKX Ventures.

The fundraising achievements for this project are remarkable, considering that the identities of its leading figures remain undisclosed. As per a press announcement, it is spearheaded by “several renowned semi-anonymous figures in the industry, such as Seb, who was previously in charge of DeFi at zkSync; and Pentoshi, the prominent Crypto Twitter figure, trader, and team member at Merit Circle.”

I’ve analyzed a May 3 post by Seb on X, and I’ve found that he mentioned concerns regarding the node sale and doubts about the project’s technical legitimacy. Many individuals appeared skeptical, expressing weariness towards the sale.

“Seb wrote that we will employ these funds to create exciting projects, foster innovation, finance initiatives, and forge strategic collaborations – all with the primary objective of benefiting our main audience. I, as a user deeply rooted in the crypto world, fully comprehend the significance of trustworthiness from the project leader when it comes to investing in a new venture.”

As a crypto investor, I would interpret this information as follows: I understand that our data needs will be met by integrating with Celestia, a different blockchain project.

What is a node sale?

As a crypto market analyst, I’ve noticed an increasing trend towards node sales in the rapidly evolving digital currency landscape. One noteworthy player facilitating this trend is Impossible Finance, a DeFi protocol that has gained traction. Impressively, they managed to secure $7 million in funding from institutional and angel investors during their 2021 seed round.

The marketing proposition is that by purchasing nodes, investors can contribute to the decentralization process of emerging networks from the outset. Simultaneously, they are rewarded with tokens as compensation, which represents an additional source of income for them.

As a Core BUIDLer at Impossible Finance, my objective is to promote decentralization in network engagement, enhance tech literacy among community members, and encourage broader participation beyond just equity holders. I aim to engage retail users more deeply, encouraging them to have a larger stake in the game than just being public observers.

FOMO

The mechanisms of node sales seem engineered to provoke a sense of urgency or scarcity, including a tiered pricing system where the price escalates as more nodes are purchased, and the implementation of exclusive whitelists that grant priority access to select users.

Node operators stand a chance to be eligible for upcoming token distributions from associated projects as an added incentive. There’s buzz among crypto traders about zkSync, a prominent Ethereum layer-2 solution, potentially introducing a new token in the future.

“I cannot comment on ‘wen zks token,'” Sophon’s Seb wrote in the May 3 tweet.

Participants who purchase Sophon nodes are bound by a rule preventing them from transferring these nodes for a period of 12 months. This regulation aims to discourage individuals from quickly selling off their nodes after major token releases, which can lead to mass exodus from the community.

As a financial analyst, I’ve observed that while some venture capital firms obtain token allocations, they often face restrictions on selling these tokens. Consequently, the apparent cost of owning and maintaining a node might not appear as burdensome, especially if those investments are yielding returns or rewards in the interim.

As a crypto investor, I understand the desire to acquire high-quality projects for potential gains. However, this strategy may not be effective with low-quality projects, according to Chu from Impossible Finance. In an interview over Telegram with CoinDesk, he explained that due to the lockup mechanism in these projects, where nodes don’t instantly distribute tokens, it becomes challenging to realize any immediate returns or benefits.