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What is Token Vesting?

Investors that understand token vesting schedules can make better investment decisions in the long run.

A graphic representation of Token vesting ( a lock with coins being released slowly over time) with the text “What is vesting? and a DuckDAO logo on a two-tone background (orange and deep blue/purple).

Vesting means a planned release of ownership (of tokens) from the project or company to the investor.

In other words, as it relates to cryptocurrency projects, it means that the token an investor has purchased in an early-stage round will be released into the custody of the investor at a predetermined schedule.

Typically vesting rules look like the following example:

15% at TGE, monthly unlocks for the next 5 months.

The example is saying that 15% of the expected tokens will be released on the Token Generation Event (TGE), with the rest of the tokens becoming available to the investor in equal parts over the next 5 months.

Why is vesting important?

Cryptocurrency investors look at a project’s tokenomics and deal offer to identify whether the terms work for them before they make an investment decision. Vesting will determine what kinds of returns a project needs to make before the investor break even on his investment.

The investor side

The ideal situation for any investor is to break even on TGE, but this depends on a lot of factors, particularly market sentiment. Depending on whether you are in a bull or bear market, the decision-making process will be different.

The project side

Looking at vesting from the project side, it’s an important buffer to ensure enough time to generate results. Vesting in crypto projects is typically very short compared to traditional investments. The entire ecosystem has a “do or die” kind of perspective when it comes down to cryptocurrency startups that have tokens. So as a result vesting is usually shorter than 1 year.

Challenge for your next early-stage cryptocurrency investment.

Ask yourself how will this particular vesting schedule affect me in the future? Does it work in my favor?

The future of vesting

Vesting is a mechanism, a tool that will stay with us for a long time. However, over time it will change. Back in early 2021, vestings for public rounds were either 100% or 50% at TGE, but never below. At the time of writing, 10–20% at TGE is normal for public rounds.

About this Article

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DuckDAO is a community-backed digital asset incubator that provides promising early-stage crypto startups with the expertise, financial resources, and marketing power needed to fast track their progress on the path to success.

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Zoran Spirkovski

Zoran publishes a blog post on Medium every day. He writes about whatever is relevant in his mind on the day he writes. Follow to get updates.