Token unlock

A token unlock happens when previously locked tokens become available. The holder can then usually keep, transfer, or sell them.

What is a token unlock?

Some tokens can’t be used right away when they’re distributed. This may apply to tokens allocated to founders, team members, or early investors.

A release schedule determines when these tokens become available. This is also called vesting. Sometimes all the tokens are released at once. Other times, a portion is released each month. A smart contract, a program that automatically carries out agreements, can manage this.

A token unlock doesn’t create new tokens. The tokens may already exist, but may have been temporarily non-transferable.

An example of a token unlock

A team member is allocated 12,000 tokens. According to the schedule, they’re released in equal portions each month over twelve months.

That means 1,000 tokens become available each month. The team member can keep, transfer, or sell them, but doesn’t have to sell them.

Why is a token unlock important in crypto?

An unlock can make more tokens freely tradable. As a result, the reported circulating supply may also increase. How this supply is counted can vary by project and data provider.

Unlocks are discussed in crypto news because recipients may sell their tokens. This can affect the supply on the market. The impact also depends on demand, tradability, and how many tokens recipients actually sell.

So an unlock doesn’t automatically mean the price will fall. The release schedule mainly shows when teams and early investors can access their allocated tokens.