Vesting Periods Explained: What new IDO investors need to know?

What is Token Vesting?

Token vesting is a mechanism that locks tokens for a certain period, releasing them gradually to related parties via the means of a token vesting contract.

Vested tokens usually belong to project team members, partners, consultants, and early investors. These tokens are released bit by bit over the vesting period as the project progresses, sometimes monthly, weekly, or even daily as a part of the token vesting contract.

This controlled release helps crypto projects maintain stability and secure ongoing development. It aligns the interests of investors and project teams, fostering a healthier ecosystem and encourages sustainable growth.

Why is Token Vesting Important?

The cryptocurrency market is very volatile, and new projects can cause huge price swings and massive sell-offs. Token vesting plays a key role in this context:

• Prevents Sell-Offs: Vesting reduces the risk of large sell-offs that can destabilize the token’s value. Without vesting, a few people could hold a large portion of tokens and dump them all at once, harming the token's price and stability.
• Long-Term Commitment: Vesting shows that the team and related parties are committed for the long haul. It gives the project team a stake in the company’s success and a reason to stay.
• Anti-Dump Policy: Vesting prevents large quantities of tokens from being sold off at once, which can cause big price drops. This builds investor trust and attracts more investment.

Types of Vesting & Tips for IDO Investors

Vesting serves to bind the token distribution plan and its tenure, often involving a 'cliff' period before the tokens are gradually released. The main types of vesting are:

• Linear Vesting: Tokens are distributed in equal portions over a set period, which could range from hours to years.
• Twisted Vesting: Tokens are distributed randomly over intervals, which could be days, weeks, months, or years.
• Milestone vesting: Tokens are distributed based on achieving specific goals. This type of vesting can apply to employees, consultants, advisors, and more.

Tips for IDO Investors:

• Legit Contract Audit: Choose projects that have undergone thorough contract audits to prevent tricky or misleading vesting terms.
• Transparency: Select projects that publicly disclose their vesting periods clearly, ensuring you have all the information needed to make an informed decision.
• Long Vesting Periods: Favor projects with longer vesting times for team tokens, showing the team's commitment to long-term success.

Conclusion

At GameFi.org, we prioritize strict due diligence, meticulously reviewing the vesting policies of each project to ensure user protection. You can confidently invest with us, knowing that we’ve thoroughly vetted each project's vesting terms. Otherwise, always remember to check the vesting policy of any project you’re interested in to make informed investment decisions.

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