What is token vesting in crypto?

Token vesting is the process of releasing a crypto project's tokens to the people who were allocated them in stages over time. It is most often applied to founders, employees, early investors and advisors, so that they cannot sell their whole allocation as soon as the token launches. The moment a slice of vested tokens becomes free is called a token unlock.

What is a vesting schedule in crypto?

A vesting schedule is the timetable that says who gets how many tokens, and when. It is usually published as part of a project's tokenomics.

Uniswap's UNI token is a clear example. When UNI launched on September 16, 2020, Uniswap Labs said 1 billion tokens were minted. About 21.3% went to the team and future employees, 18% to investors and 0.69% to advisors, and all three groups were placed on four-year vesting. Community tokens followed their own schedule, with 15% claimable right away and the treasury share released over four years, starting large and shrinking each year.

What is cliff and vesting in crypto?

A cliff is an opening period during which nothing vests at all. CoinTracker describes it as an initial lock that often lasts 6 or 12 months. When the cliff ends, the tokens that would have vested during it usually become available together, and regular vesting continues from there.

CoinTracker gives a simple case. A team member is granted 100,000 tokens with a 12-month cliff followed by 36 months of vesting. Nothing is released in year one, then roughly 2,777 tokens a month are released for the next three years. OpenZeppelin's code library, widely used to build these contracts, notes that a cliff does not move the end date of a schedule. It only delays the first payout.

What is linear vesting in crypto?

Linear vesting releases tokens at a steady rate. The rate can be continuous, where a little more vests every second, or stepped, where equal chunks vest each month or quarter. OpenZeppelin's standard VestingWallet contract uses a straight-line curve by default, and developers can swap in a different curve, such as one tied to milestones.

In these contracts, vested tokens are not pushed out automatically. The beneficiary, or anyone allowed to trigger it, calls a release function that sends whatever has vested so far. OpenZeppelin also warns that a beneficiary can transfer ownership of the wallet itself, which shows that code alone cannot stop every way of trading unvested tokens.

What is the vesting period in crypto?

The vesting period is the total time from the start of a schedule until every token in an allocation has vested. Four years, as with UNI, is a common length for team and investor tokens, though projects choose their own terms.

CoinTracker notes that a lockup differs from vesting. A lockup typically frees everything at once when it ends, while vesting spreads releases out, and some projects use both. Schedules can sometimes be changed through governance, so the current terms in a project's own documents are the ones that count. For how insiders' allocations affect a token's valuation, see FDV in crypto.