What is Vesting?

Vesting is a mechanism for distributing assets (such as company shares or tokens in cryptocurrency projects) over a specific period or upon meeting predefined conditions. The primary goal of vesting is to encourage long-term loyalty among employees, investors, or project participants.

How does vesting work?

🔵 Cliff period:

— At the beginning, participants do not have access to the assets. For example, this can last 6 months or a year.

— During this period, the employee or investor needs to demonstrate their performance.

🔵 Vesting schedule:

— Assets are distributed gradually, for example, monthly or annually.

— Full distribution may take several years (usually 2–4 years).

🔵 Conditions:

— Access to assets depends on fulfilling conditions such as tenure, achieving KPIs, or adhering to other agreements.

In cryptocurrency projects, vesting is often used to distribute tokens among:

🔵 Project teams: To motivate founders and developers to stay committed.

🔵 Investors: To protect against a sudden sell-off of tokens on the market.

🔵 Early adopters: To encourage long-term participation.

Tokens undergoing vesting are usually locked in a smart contract and released as timelines or conditions are met.

Advantages of vesting:

🔵 Stability: Helps retain employees or investors in the project.

🔵 Motivation: Encourages long-term involvement and productivity.

🔵 Control: Protects assets from mass withdrawal or sell-offs.

Risks of vesting:

🔵 If a participant leaves the project before completing the vesting schedule, they may lose access to part or all of the assets.

🔵 Failure to meet project conditions may also affect asset distribution.