Token Vesting in Crypto

Team built the project. Investors funded it early at steep discounts. Advisors consulted. All got token allocations.

Without restrictions they'd sell everything on launch day. Price would collapse before most retail buyers finished reading the announcement.

Vesting is the restriction. Tokens locked for a period. Unlock over time. Aligns long-term incentives in theory.

In practice depends entirely on how generous the schedule is. And most are more generous to insiders than they look at first glance.

Cliff and Linear: The Two Parts

Cliff. Initial lockup. Nothing moves. Team tokens frozen from launch for however long the cliff runs. 6 months, 1 year, occasionally longer.

Linear vesting. After cliff ends, tokens release in chunks. Monthly usually. Sometimes quarterly. Drips supply into the market over time instead of one large dump.

1 year cliff, 3 year linear. Standard framing that sounds serious.

What it means practically: team holds for 12 months, then receives 1/36th of their allocation every month for 3 years. Four years to fully liquid. Meaningful on paper.

But seed investors who paid $0.005 per token watching it trade at $0.50 after a year? Their "locked" tokens are sitting on a 100x. Vesting schedule is the only thing between retail and that exit. When the cliff ends they have every incentive to sell and no financial reason to hold.

TGE Unlocks

Some allocations release a percentage immediately at launch.

"15% TGE, 12 month cliff, 24 month linear."

15% of the insider allocation hits day one. Project just launched. Team already liquid on a portion.

Public sale buyers getting TGE unlock makes sense. Paid market price. Deserve liquidity.

Team and seed investors at 50-100x lower cost basis getting immediate unlock on launch day is a different conversation. Why do they need liquidity on day one from a project they're supposedly committed to for years. Sometimes operational costs. Usually just extracting early.

What Bad Vesting Looks Like

Short total period. 12 months or less for team tokens. Barely a deterrent.

No cliff at all. Linear from day one. Constant insider selling from launch.

Large TGE for team. Taking profit immediately on a project supposedly in early stages.

Schedule not publicly disclosed. Teams that won't show when their tokens unlock have a reason for that.

Tokens "locked" in a contract the team controls. Can modify or bypass at will. Not vesting. Marketing.

What Good Vesting Looks Like

Minimum 1 year cliff for team. 3-4 year total vesting. No TGE unlock for insiders.

Immutable time-lock contract. Code enforces it. Team can't touch it regardless of what they decide later.

Schedule published before launch. Verifiable on-chain. Matches documentation.