Token Vesting
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Core concepts

Definition & Meaning

To understand more about linear vesting, we first need to understand the definition of “vesting”. In the decentralised finance ecosystem, businesses can distribute tokens to founders, key employees, advisors and investors. “Vesting” is the process of releasing tokens to stakeholders after a certain period of time also known as the “lockup period”. It is therefore a mix between the duration and the quantity of token acquisition. The term “linear” defines this acquisition of tokens in a progressive way where the tokens are gradually unlocked. After the “lockup” period, the tokens can be claimed by stakeholders. The quantity of tokens recovered will depend on the acquisition model adopted by the project.

Vesting and the advantages of progressive acquisition of tokens

Linear Vesting limits the volatility of the crypto-assets as the tokens are gradually introduced on the blockchain as opposed to being introduced all at once. It is a solution to stabilise supply and demand over the long term. On the other hand, this crypto-asset release system also warrants that stakeholders will not cause the price to drop by selling them prematurely or extensively. It is a stabilising solution that ensures the long-term commitment of parties to a project. This is the guarantee that the company has a financial interest in continuing to develop the project, which allows trust from potential stakeholders. Moreover, generally reserved for quality projects, this vesting system and the progressive acquisition of tokens makes it possible to limit “rug pull”, a type of crypto scam that happens when a team pumps their project’s token before disappearing with the funds, leaving their stakeholders with a valueless asset.