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Vesting Period Meaning

May 21, 2023 | Updated Jul 19, 2023
A vesting period in crypto refers to a predetermined time frame during which certain tokens or assets are restricted and become accessible or transferable over time.

What is a Crypto Vesting Period?

In the crypto industry, the vesting period is the phase when a project restricts the sale of its early investor tokens. These tokens are acquired by early investors, project stakeholders, and contributors during the pre-ICO stage. The project’s vesting determines how long these tokens will be “locked” and the intervals at which they will be released. 

It is a mechanism designed to gradually release or unlock tokens over time, often as a means to incentivize long-term commitment, discourage immediate selling or dumping of tokens, and promote stability within the crypto ecosystem. The vesting period allows token holders to gain access to their tokens gradually, ensuring a more controlled and measured distribution of assets within the network.

The vesting model is not unique to cryptocurrencies and has been in use in traditional financial markets for decades such as employee stock options or restricted stock units (RSUs). For instance, companies grant employees stock options as a form of compensation. These stock options give employees the right to purchase company shares at a predetermined price within a specific period. The vesting period determines when the employee can exercise these options and acquire the company’s shares. Typically, employees need to work for a certain period of time before their stock options fully vest and become exercisable.

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