Vesting
Vesting is an arrangement in which someone gradually gains the right to receive assigned tokens. The timing and amount of tokens that become available are set in advance.
What is vesting?
Crypto projects often use vesting for tokens assigned to founders, employees, advisors, and early investors. This means the tokens don’t all become available at once.
A vesting schedule sets when tokens become available, for example, a portion each month. Sometimes there’s a cliff first: a waiting period during which no tokens become available. After that, an initial portion may become available, with the rest following the schedule.
Vesting isn’t the same as a lock-up. With vesting, the right to receive assigned tokens is earned gradually. With a lock-up, tokens have already been assigned but can’t be transferred temporarily. Projects sometimes use these terms less strictly.
An example of vesting
An employee is assigned 12,000 tokens with a 24-month vesting schedule and no cliff. An equal portion becomes available each month: 500 tokens.
After one month, 500 tokens are available. After two months, that’s 1,000 tokens. This way, the employee doesn’t receive all 12,000 tokens right away.
Why is vesting important in crypto?
Vesting can help keep team members and early investors connected to a project for longer. It also makes clear when assigned tokens may become available for transfer or sale.
In crypto news, you’ll often see vesting mentioned in connection with token distributions, team rewards, and announced token unlocks. An unlock can increase the tradable supply, but it doesn’t automatically mean recipients will sell or that the price will fall.
Vesting may be managed through smart contracts, or through an administrator or legal agreement. So always read the exact terms. Vesting doesn’t guarantee that a team will stay involved, that a project will succeed, or that the token price will remain stable.
