Vesting
Vesting is a time-based lock-and-release arrangement in which tokens become available gradually over a defined period instead of all at once, typically for team members, early investors and advisors.
How vesting works
When a project launches, a large share of tokens often goes to its founders, employees and investors. To stop them from selling everything on day one, those allocations are locked and released on a schedule. The schedule may be enforced by a smart contract on-chain, or by legal agreements and a custodian off-chain.
A common structure has two parts. First a cliff: a period, often 6 to 12 months, during which nothing is released. Then linear vesting: tokens unlock in equal portions, for example monthly, over the following years.
An example
Say an investor holds 12 million tokens on a schedule with a 1-year cliff and 24 months of linear vesting after that. For the first year they can sell nothing. When the cliff ends, the first monthly portion of 500,000 tokens unlocks, and another 500,000 follows each month until all 12 million are free. Some schedules instead release a lump sum at the cliff, which creates a larger single unlock.
Why it matters
Vesting aligns insiders with the project's longer-term success, at least on paper. For market participants, it also defines when new supply arrives. Large cliffs and unlock dates are widely watched because insiders who bought at very low prices may sell once they are able to.
What to watch for
Check whether vesting is enforced on-chain or only promised. Off-chain arrangements depend on trust. Look at who holds which share, how long their schedules run, and whether the schedule has ever been changed. Short vesting periods for insiders, or a large share unlocking soon after launch, increase dilution risk. Also remember that locked tokens can sometimes be staked or used in governance before they vest.
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Frequently asked questions
What is a vesting cliff?
An initial period during which no tokens are released at all. Once it ends, regular vesting begins, sometimes with a lump sum.
Is vesting the same as staking?
No. Vesting is a lock on an allocation set by the project. Staking is choosing to lock coins to help secure a network in return for rewards.
Where can I see a token's vesting schedule?
In the project's documentation and on unlock trackers; for on-chain vesting, the contract itself can be checked on a block explorer.
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