Initial coin offerings and token sales are quickly losing popularity in the blockchain funding world, as more crypto projects embrace the idea of a “node sale”.
Node sales are a novel approach to raising money and increasing community participation, and they’ve gained a lot of attention in the last year. The reasons for this are straightforward. They’re an excellent way for projects to build a truly decentralized network, enticing supporters with a unique investment opportunity. Instead of just holding tokens, the project’s users can become active participants, playing a key role in the day-to-day running of their infrastructure.
Various kinds of blockchain initiatives, ranging from AI and blockchain gaming networks to decentralized storage platforms and data layers, have embraced the node sale concept and managed to attract millions of dollars in funding. But what is a node sale, exactly?
Node sales in a nutshell
Node sales are a pretty simple concept, which sees projects sell hardware-based nodes to their community members. These nodes are servers or some other device that’s designed to run the decentralized network, in tandem with hundreds of other nodes, ensuring its decentralization. Most people know that Bitcoin is decentralized, hosted by thousands of servers across the globe, each of which stores a company of its underlying blockchain and updates it as new “blocks” are added.
The main difference is that with Bitcoin, node operators are required to use their hardware. With node sales, projects sell pre-made hardware that’s customized for the job, making them more efficient for the task at hand.
Nodes play a critical role in maintaining the health of any blockchain. If there aren’t enough nodes, the network could easily be manipulated or even collapse completely if they go offline, so it’s in the interests of every crypto project to have a healthy number of them.
When an investor purchases a node during a sale, they don’t just get the hardware – they become a part of the network’s infrastructure, providing compute, storage, or validation services – whatever is needed. Moreover, they’re compensated for this too, as node operators receive passive income via transaction fees or newly minted tokens.
Every node sale is different
By selling nodes, blockchain projects can raise the funds they need to deliver on their ambitions, while simultaneously achieving their network decentralization goals. In the past year, we’ve seen several interesting node sales pop up.
One of the most intriguing node sales is OG Foundation’s AI Alignment Node Sale, which launched in October 2024, giving community members the opportunity to participate in its decentralized AI operating system project.
OG has ambitions to create a modular network for on-chain AI that can scale to support industry growth without being encumbered by legacy consensus mechanisms. By having a blockchain that’s dedicated to AI, the network can avoid being constrained by unrelated use cases taking up valuable block space, paving the way for the rise of more transparent and decentralized AI models with credibly neutral training and execution, using data free of copyright and privacy concerns.
OG’s AI alignment nodes are meant to monitor the behavior of AI Models running on the network to ensure that they’re working safely and reliably, in line with the project’s values. This task involves continuously checking on the AI model’s outputs in order to identify instances when they deviate from their expected behavior or fail to uphold ethical standards. The idea is that this monitoring will help to prevent OG’s AI models from acting maliciously.
The node sale kicked off on Nov. 13, 2024, and there are plenty of options for investors of every stripe, with a whopping 32 node tiers available. The first tier of nodes went on sale with a starting price of just 0.05 Ethereum (around $180). By running an AI Alignment Node, operators can earn up to 15% of the total OG token supply emissions over the next three years, in addition to a share of the network’s transaction fees.
It’s important to note that all node sales have their intricacies and peculiarities. Earlier this year for example, the Solana-based gaming Layer-2 network Sonic SVM hosted its HyperFuse Node sale, giving community members the chance to acquire NFTs that provide them with the rights to host a node, rather than the hardware itself.
The NFTs give holders the right to participate in Sonic SVM’s network and monitor transaction-processing validators for malicious behavior, earning regular rewards in the shape of SONIC tokens for maintaining the network’s integrity. In the case of Sonic SVM, there was no need to sell any dedicated hardware as a simple laptop running Windows is sufficient for the task in hand, so long as it meets the minimum requirements of 8GB of RAM, 1GB of disk space and a 1-core CPU - which means any laptop made in the last 15-20 years.
Another novel aspect of Sonic SVM’s node sale is that NFT holders don’t even have to run a node themselves. They also have the option to rent their NFT to someone else, so that person can run the node instead, with the owner earning a commission of up to 20%.
Node Sales can make some serious money
It’s easy to see why node sales are becoming popular. Not only do they increase community participation and strengthen the health of the network, but they can also generate some serious money too.
Some earlier node sales have successfully raised millions of dollars in revenue for their projects, with one of the best-known examples being the decentralized “Internet of Things” network Helium. In mid-2022, Helium launched a sale of hotspot nodes, giving users the opportunity to host its network and provide the WiFi connectivity it needs to connect millions of devices globally.
Last year, Helium reported that it sold more than one million Hotspots during the sale, raising a cool $100 million in revenue that was funneled back into the project’s development.
An even more famous example is Filecoin, one of the earliest decentralized storage projects in the blockchain industry. It held one of the first-ever node sales, allowing community members to buy a dedicated storage device that they can then “rent” back to the project, ensuring that its storage services are globally distributed.
Filecoin’s storage capacity has since grown exponentially, and in 2023 it revealed it had surpassed $20 billion in network value, illustrating the scalability advantages of node sales.
Node sales provide enticing benefits
While the details and specifics of each node sale is different, due to the peculiarities of the project in question, they all share one commonality in that they provide users with the opportunity to become a part of the projects they love.
For investors, the most obvious benefit of participating in a node sale is the long-term revenue. Operating a node brings the opportunity to earn rewards, and the return on investment can be enormous if the project succeeds. The main challenge for investors is to identify which projects are destined to grow, because, as a rule, the more successful they become and the more users it attracts, the higher the rewards = will be.
In addition, some investors are attracted to the idea of being able to influence the future of the network. Node operators generally have a much greater influence than other community members, such as token holders, with their votes being given more weight in governance decisions. It means they’re better placed to help dictate the future of the project and ensure it aligns with their values.
Of course, if you’re invested in a crypto project and holding some of its tokens, you’ll also want to ensure that it becomes as decentralized as possible. By owning a node, you’re contributing to that, thereby increasing the network’s health.
Node sales also have risks
Like any kind of investment, participating in a node sale isn’t without its risks. For one thing, buying a node might require a significant financial commitment.
In the case of OG’s ongoing node sale, the lower tier node prices are quite affordable, priced at less than $500, but investors would do well to move quickly, as those prices will ultimately increase to over $3,000 in the higher tiers.
The costs quickly accelerate in most node sales. Helium’s lowest-tier Hotspots sold for less than $100, meaning those who got lucky could start earning a return on their investment pretty quickly. But the vast majority of nodes - sold via higher tiers – cost upwards of $400, which meant later investors would have to wait two years or longer to see a return on that investment.
Another consideration is the operational expenses of running and maintaining a node. Computer hardware requires electricity, which needs to be paid for, and there may be other expenses too, such as maintaining the physical hardware and cloud hosting costs.
In addition, node operators take on a burden in terms of security. It’s part of their job to interact with the blockchain on an ongoing basis, and that means taking care to ensure their node is not compromised. Failure to do this could put the network at risk and may result in some kind of financial penalty.
Of course, investors must be cautioned that node sales are never guaranteed to provide a return on investment. Although nodes do generate income, the amount they can earn is dependent on the success of the project. If the network grows to the size of Bitcoin or Ethereum, node operators could stand to make millions of dollars in the long run. But for every blockchain project that succeeds, just as many end up in crypto’s graveyard.
Node sales are the future of blockchain funding
Many in the crypto community believe node sales are a good thing as they improve the security of networks and enable new use cases like decentralized storage and GPUs. They’re not just a funding mechanism but represent a chance to get fully involved and participate in a project’s future in a more meaningful way. Node sales provide strong incentives for operators to do everything they can to help grow the network, and that can lead to increased engagement, accelerating their momentum.
Node sales do pose some risks, just like any other investment, but by giving investors a chance to become more involved, they can be a lot more enticing to the most passionate believers.
As more companies look to leverage decentralized networks, node sales will likely continue to grow from strength to strength, helping the most promising projects to raise essential funds and reward their biggest supporters for backing them all the way.
