Token Vesting
Understanding the needs of blockchain communites
In traditional finance, to keep the interests of the different stakeholders in terms of governance and ownership, organisations tend to use a shareholding structure and vesting. Shareholding structures can be quite complex and split the roles of the stakeholders, but for the sake of this explanation, we would take as example a shareholding model where governance and ownership are equitable, and where the different stakeholders receive shares. The vesting come to play when to ensure execution and success in terms of KPIs, founders and owners give away these shares based on results or time. Decision-making power and ownership will be then represented by the proportion of shares of the stakeholder against the total amount of shares belonging to the organisation.
In the decentralised finance ecosystem, projects and organisations create their governance and ownership models based on token economies, and with it, distribute tokens to founders, key employees, advisors, supporters, investors and/or pools and reserves. When tokens are issued and distributed, new stakeholders could potentially appear, and altogether they form the "community". During this process, the different stakeholders will receive tokens based on their allocation and a schedule.
Opposite to traditional startups, where the equity of the project is illiquid and difficult to trade, and where organisations have "control" over governance and ownership, blockchain startups have tokens that can be instantly transferred or sold in DEXs and CEXs. This fact compromises governance and ownership of blockchain economies, which can be easily affected with premature selling or buying that could lead to massive inflation and/or deflation of the token market.
Based on this premise, "vesting schedules" play a significant role to create a safer economy and provide a smooth transition of control from project owners to the community, and most of the blockchain projects use these mechanisms to reduce impact and the risk of having all the token supply liquid.
In common token vesting schemes, the token "release" is dependent on manual interactions from project owners. This lacks the transparency and security which blockchain communities promise. The tokens are held by an address which is controlled by one or more project owners (operators) and released based on a schedule that can be changed, delayed, and are susceptible to human error, i.e.: if the operator has an error with their keys, then the tokens of all the stakeholders are compromised. If the operator had a bad day and fights with the founder, they may take all the funds. This human involvement generates a significant mistrust in what should be a trustless economy.
To address these fundamental issues, Dandelion Labs introduces the "Token Vesting platform". The Token Vesting platform comprises a set of on-chain and off-chain solutions that allows any project to create a transparent, secure and easy to manage token vesting schedule, bypassing the operational workload, providing an automated and dynamic vesting structure which allows all parties to build trustless while providing serious motivation.
This project has as objective to provide the industry with open-source technology to enable an automated and transparent token vesting system, avoiding manual operational workload along with an optimised and user-friendly front-end, to build trustless and ensure aligned incentives.
Copy link