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Vesting is when a certain amount of tokens is locked up for a specific time period. In the world of cryptocurrencies, it means gradually releasing tokens over time to people like investors, project teams, and advisors who contribute to the project. It’s done to ensure the project’s success, create trust and prevent price manipulation.
It is important in crypto projects for a few reasons. First, it helps stabilize token prices by preventing sudden selling. By releasing tokens gradually, it reduces speculation and makes the market more stable.
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Second, it shows the project team’s long-term commitment. Releasing tokens over time shows they believe in the success of the project. This boosts investor confidence and ensures the project can continue to grow.
Vesting is also important for advisors and partners involved in the project. It encourages their dedication and keeps them motivated. This helps maintain long-term collaborations, which bring valuable knowledge and expertise to the project.
Types Of Vesting
It plays a crucial role in crypto projects, ensuring success and supporting a healthy ecosystem. Gradually releasing tokens helps stabilize prices, builds trust with investors, and shows long-term commitment. It also motivates the project team and other contributors. It is a key element for sustainable success in the world of cryptocurrencies.
- Linear Vesting: Linear vesting refers to unlocking assets in equal time intervals. For example, if stakeholders are entitled to receive 5% of the tokens every six months, it is an example of linear vesting. This means that participants would have received 20% of the tokens over a two-year period.
- Graded Vesting: As the name suggests, graded vesting is a type of vesting where tokens are unlocked gradually. For instance, in this type, 5% of the tokens may be unlocked after the first six months, followed by an additional 10% after 18 months and a total of 30% after three years. Keep in mind that the specific percentages may vary from project to project. If a stakeholder leaves before the vesting period, they may only receive the tokens they have earned during their time in the project.
- Cliff Vesting: In cliff vesting, the timing of when a stakeholder will receive their tokens is predetermined. Once the specified period is reached, the stakeholder is eligible to receive their full allocation of tokens. However, if a stakeholder leaves the project before the cliff period is over, they may not receive any tokens at all.
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