Crypto Terms:
Letter V
Jul 07, 2023 |
updated: Apr 02, 2024
What is Vesting Period?
Vesting Period -
a certain time period in which the sale of a token is restricted.
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Let's find out Vesting Period meaning, definition in crypto, what is Vesting Period, and all other detailed facts.
The vesting period (also known as token lockup) is a specific time period in which tokens purchased during the ICO pre-sale stage are restricted from being sold. Usually, the tokens are transferred after they have been received (not all the time though).
Lockups come in various types, and they're frequently used together with other systems like soft caps and bonus tiers. Each has its own set of benefits and drawbacks.
The main reasons why the vesting period is beneficial:
- It allows the development and launch of a product, especially if there is no prototype at the moment. During this time, investors can assess the project's progress and decide whether to keep their tokens or trade them for another cryptocurrency like ETH or BTC.
- It protects early investors from major price volatility since sellers must wait a certain amount of time before selling their investments. This gives the token price some stability and assures that the early project participants have enough time to use the platform or benefit from it by earning dividends.
- It decreases the amount of unprofessional hype surrounding projects.
The exact reasons for the use of the token lockup are different among various projects. Though there are some major ones:
- It allows the team to track the value of a token.
- It prevents developers from selling their tokens immediately after trade begins, safeguarding the interests of holders.
- It prohibits dumpers from crashing the price of the token as soon as it is listed on an exchange.
- It restricts the ability of holders to easily sell their tokens, providing them with time to reconsider their decisions.