What is Vesting in Crypto?
In cryptocurrency launches, the vesting period is the period of time in which the tokens sold in the token presale are prevented from being sold on the open market. This is accomplished by using smart contracts which limit the spending ability of certain wallet addresses.
Vesting typically applies to developers and other project team members. However, some presale or private sale investors may also be vested and prohibited from selling for a specific time after launch.
The vesting period is usually determined by the project developers and is done for a number of different reasons including price and liquidity stabilization.
A Deeper Look at Vesting in Crypto
While the DeFi space is helping to revolutionize the crypto and financial industry, it is currently facing major challenges, including:
- Protecting investors from scams and rug pulls
- Protecting investors from high price volatility and price crashes
- Instilling investor confidence in new and upcoming projects
These issues can be minimized by ensuring that developers, team members, and whales are prevented from selling their tokens for a certain period of time.
Token locking prevents holders of large amounts of tokens from selling as soon as the project goes live, thus causing the price to crash. In this way, vesting is seen as an anti-dump measure.
Also, specifying a vesting period also helps to deter persons who are just buying expecting to make a quick buck. Instead, investors are encouraged to hold, thus increasing the number of holders on the project and promoting a healthier token economy and price action.
Overall, vesting helps to instill investor confidence by assuring them that the project is not just another “pump and dump.”
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