Deal Terms
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Quick Answer
A predetermined timeline governing when tokens allocated to investors, team members, or advisors become transferable, often enforced via smart contracts.
A Token Vesting Schedule is the timeline and structure that governs when cryptocurrency tokens become fully accessible to their holders. Similar to equity vesting in traditional startups, token vesting prevents large holders from dumping tokens immediately after launch. Vesting schedules typically include a cliff period (6-12 months after TGE where no tokens unlock), followed by linear or stepped unlocks over 2-4 years. Unlike equity vesting, token vesting is often enforced on-chain through smart contracts, making it transparent and tamper-proof. Different stakeholder groups typically have different vesting schedules: team members and founders usually have the longest vesting (3-4 years), investors vest over 2-3 years, and community allocations may have shorter or no vesting. The market closely watches upcoming unlock events as they can create significant selling pressure.
In Practice
A DeFi protocol allocates 20% of tokens to investors with the following vesting: 6-month cliff after TGE, then linear monthly unlocks over 24 months. On a 100 million token supply, investors receive 20 million tokens total. After the 6-month cliff, roughly 833,333 tokens unlock each month. The community tracks these unlocks via blockchain explorers and anticipates potential selling pressure at each unlock date.
Why It Matters
Token vesting schedules directly affect market dynamics and investor returns. Poorly designed vesting can crash token prices when large tranches unlock simultaneously. Investors should analyze the full vesting schedule across all stakeholder groups to understand future supply pressure and potential dilution of token value.
VC Beast Take
Smart contract-enforced vesting is both a blessing and a curse. Unlike equity vesting where you can negotiate modifications if someone leaves early, token vesting is often immutable once deployed on-chain. We've seen multiple situations where founders wanted to adjust vesting for departing team members but couldn't because the smart contract was already live. Always build in flexibility before deployment.
A Token Vesting Schedule is the timeline and structure that governs when cryptocurrency tokens become fully accessible to their holders. Similar to equity vesting in traditional startups, token vesting prevents large holders from dumping tokens immediately after launch.
Understanding Token Vesting Schedule is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Token Vesting Schedule falls under the deal-terms category in venture capital. This area covers concepts related to the financial and legal terms that define investment agreements.
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