Vesting is a process in which a certain number of project tokens are set aside for a certain period of time and released after certain conditions are met.
Cliff (cliff) - the period of time that must pass before the release of tokens begins.
During the period that tokens are locked, investors are unable to transact or trade those specific tokens during that time. This helps reduce market manipulation and token dumping to improve project stability.
▪️The essence of the vesting mechanism
A new project is launched, tokens are distributed among developers, founders, and primary investors. Sometimes liquidity providers receive token rewards.
Some are interested in the long-term growth of the project, while others just want to make a profit and leave.
To maintain a balance of interests of all investors and developers, a vesting mechanism is adopted.
▪️Tokens are distributed gradually:
For example, primary investors and the founder can receive their tokens in parts for a long period of time and, accordingly, I cannot arrange a Rug Pull, that is, skim off the cream at the ICO and immediately sell all of my tokens. Leaving long-term investors with nothing.
▪️Benefits of vesting
- Makes the token price more stable
- promotes decentralization
- creates loyalty and stimulates the team, founder and investors to work on long-term goals
▪️ Let's consider an example with the dYdX graph above. 12/01/2023 cliff for a large number of dYdX tokens. Investors and employees will receive tokens, and obviously this will put serious pressure on the market.
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