Vesting

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Revision as of 14:13, 3 May 2022 by AS42 (talk | contribs) (typos)
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Vesting is a mechanism of token unlock in tokenomics that delays full distribution of a token or a coin by releasing small amounts of it over a larger period of time.

Usually projects will implement some kind of vesting for the allocation of tokens of early investors (VCs, early backers, advisors), as well for the protocol development team. It incentivises investors and teams to stay focused on making project a success over a longer period of time (in contrast where the team or investors can dump all of their tokens right after the public sale and just walk away).

Most usual vesting schedule in a decent project will be 2-4 years with a cliff of 6-12 months.

Cliff

A cliff or vesting with a cliff adds a delay to the initial access to the token. It removes some of the sale side pressure in the initial stages of a token launch. Also a cliff is called a cliff because it looks like an actual cliff if a vesting schedule were a mountain (see in a second example bellow).

Vesting Examples

Examples Description Graph
4 year linear vesting Project A raises money from investors in exchange for the some amount of tokens with a 4 year linear vesting schedule.


Meaning that through the first year investors will be gradually getting 25% of their token allocation, second year another 25% making it 50% in total and so on.

4 year linear vesting
4 year linear vesting with a 1 year cliff Project B raises money from investors in exchange for the some amount of tokens with a 4 year linear vesting schedule with a 1 year cliff.

Meaning that investors will be able to access 25% of their token allocation only at the end of the first year, from that moment they will be getting a gradual linear allocation similar to Example 1.

4 year linear vesting with a 1 year cliff