Vesting: What is it and why does it matter?

What is vesting?

Similar to the term used in traditional finance, crypto vesting restricts the sale of a token for a predefined period of time. The tokens are set aside for the team, partners, advisors, and others who are contributing to the development of the project. After the duration, they will be gradually released during the project process.

With vesting in place, token owners cannot sell their assets before a set date. This makes vesting a good way to control the distribution and release of tokens in the pre-sale period.

How does it work?

Once a project decides on their vesting schedule, a contract (or smart contract) will be created to establish the conditions of its token lockup process.

Every project can decide the duration of its vesting period, and the token release schedule. For example, a project implements a 36-month vesting schedule. They can choose to release 25% of it after 12 months, another 25% after 24 months and the remaining 50% after 36 months. In such a scenario, token owners will regain full control over their tokens in 3 payments.

Why does it matter?

Protects against market fluctuations

Vesting periods prevent investors from selling their assets at once, which would lead to an increased token supply on the market—a move that would result in a crash in the token’s price.

Vesting also helps to weed out investors who are only interested in “pump and dump” schemes, which will destabilize the market.

Overall, vesting helps to boost the stability of a token’s price.

Prevents developers from abandoning the project

Vesting is usually used to show that the team is highly interested in the project, and will continue working on project development. By restricting the sale of the tokens for a period of time, the founding team is prevented from running away with the funds.

What are the types of vesting schedules?

Tokens can be released based on different schedules aligned to the project’s objectives. These are the main types of vesting schedules:

Linear vesting

This is the simplest vesting schedule where tokens are released in equal portions over a specified time. For example, 25% of locked tokens are released every 6 months. This means that the tokens will be fully released in 24 months.

Graded vesting

This is a custom distribution schedule where tokens are released gradually over a specific time. For instance, 10% of tokens are released in the first 4 months, 20% in the 12-month mark, 30% in the second year, and the final 40% in the fourth year.

Cliff vesting

As the name suggests, this type of vesting implies the presence of a cliff, which is a period when no tokens are released. For a 6-month cliff, the tokens will only begin to be unlocked after 6 months. Once the cliff period is over, the token release will follow a linear or graded schedule.

What is the token vesting schedule for DeFiato?

50% of all DFIAT Tokens are locked via a vesting schedule, and will be released gradually based on demand and supply.

DeFiato has released 20% of public tokens at the TGE back in March 2022. It was followed by a 90 days cliff that ended in May 2022. Now, investors are able to claim their 8,89% of their initial investment every month on their respective launchpads (linear vesting).

In addition, 15% of DFIAT tokens allocated to the DeFiato team, advisors, partners and consultants will only be unlocked after 24 months and released with a linear vesting schedule over 12 months. These tokens are locked up to provide the assurance that the DeFiato team maintains a long-term vision, and will continue to create value for the project and the DFIAT token.

The public vesting release happen on the 8th of every month (i.e.: 8th of July, 8th of August). Users can claim claim DFIAT tokens on the respective launchpads:

DAOMaker