New cryptocurrency projects regularly emerge, each seeking capital. It is now increasingly commonplace for these projects to offer tokens during crowdfunding or coin offering events.
The value of these tokens fluctuates over time and is determined by various factors, including supply and demand. Crypto vesting is employed as a way to stabilize this value. But what exactly is crypto vesting?
What Is Crypto Vesting?
Crypto vesting occurs when tokens are locked for project members and early investors for a specific amount of time, to be released after.
In the traditional finance landscape, it is common for companies to offer equity to employees. However, if these employees access or cash out their shares simultaneously, it can generate selling pressure and drag stock prices. As a result, companies usually employ vesting to delay the ownership and use of the promised assets. Crypto vesting is the crypto version of this.
It can be likened to a tentative rewards package to be given out to the first contributors of a crypto project once it has a foothold.
How Does Crypto Vesting Work?
Crypto vesting employs smart contracts to release the held tokens when a project hits certain predefined milestones. The milestones, defined by founding members of the project, could be duration-based (how long since the project started) or stage-based (the completion of specific stages in the project).
A vesting schedule is used to accomplish the time-bound release of the held tokens. This schedule spells out the duration and percentage of the token to be paid out to each early investor and the time from which they can sell the tokens they own from the initial coin offering (ICO) period.
The time frame of the release is called the token lock-up or vesting period. This period can range from six months to a few years after the introduction of the token into the market. Vesting schedules allow for the release of a certain percentage of the held token…
