Token Vesting is a mechanism that locks up newly issued cryptocurrency tokens for a predetermined period, releasing them to recipients according to a specific schedule. This practice is common in crypto projects for founders, team members, advisors, and early investors. Its primary purpose is to align incentives, prevent large-scale dumping of tokens immediately after launch, and promote long-term commitment to the project’s success.
Mechanism
The operational mechanism of token vesting typically involves smart contracts that hold the tokens and programmatically release them over time. The vesting schedule specifies the “cliff” period, during which no tokens are released, and the subsequent linear or periodic release of tokens over several months or years. These smart contracts are immutable once deployed, ensuring transparency and automated enforcement of the distribution schedule.
Methodology
The strategic implementation of token vesting serves as a critical governance and economic tool within a crypto project’s tokenomics design. It helps manage token supply, reduces selling pressure, and signals confidence in the project’s future value to potential investors. For institutional investors evaluating crypto projects, understanding the vesting schedules of large token
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