What is token vesting?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
Vesting releases tokens allocated to a team or investors gradually over time rather than all at once, to prevent an immediate mass sale. Whether it is enforced by a contract or merely promised makes all the difference to how much it means.
Key points
- Releases an allocation in stages over time
- Often includes a cliff during which nothing releases
- Contract enforcement is what makes it real
- Progress can be verified on chain
Definition
An arrangement in which allocated tokens cannot be transferred immediately, and instead become available in stages according to a predefined period and conditions.
A typical structure is a twelve-month cliff followed by thirty-six months of linear release: nothing at all for the first year, then equal monthly portions. The cliff exists so that people who leave early do not keep their allocation.
How much it means depends on the lock. If tokens sit in a vesting contract that only releases with elapsed time, nobody can accelerate it. If the arrangement is just a public promise not to sell, they can sell whenever they like. What matters is where the tokens actually are, not what the announcement says.
Release progress is traceable on an explorer. When the vesting contract address is published, you can watch the balance decline and see where the tokens go. A gap between the published plan and the observed movement is itself significant information.
Watch out for
- · 'Locked' is sometimes only a statement, with no contract actually enforcing it
- · What happens to tokens once released is entirely up to the recipient
- · A long vesting period is not a promise about price