The construction of each blockchain project requires fundraising to ensure that it is stable after it is launched. In these circumstances, token vesting is not only important to the fundraising of most blockchain projects, but it also keeps people active for a longer period of time. Let’s talk about Vesting crypto explanation for blockchain projects.
Vesting has its root in the Latin “vestry”, and this word refers to the act of putting assets into custody by a third party in this context.
Going back to Defi, token vesting — what some call token locking — is the process of locking a certain amount of the total token from circulation. These tokens are typically issued over an agreed upon period of time, often years.
Core team members, partners and advisors are always entitled to receive these issued tokens. The reason behind token vesting is to make sure the core stakeholders of the project don’t receive their rewards at the same time, thus keeping them around to ensure the development of the project.
Let’s keep this explanation of vesting simply: it’s the act of locking up some tokens to be released gradually as the project grows.
Like several other concepts in Defi, token vesting has its roots in traditional finance. It became popular when it was included as a labor policy.
That is, some companies have adopted a plan in which they will keep a portion of an employee’s salary for many years so that they can receive it in retirement. The purpose of the evaluation is to make the employee spend a longer time in the company.
Gradually, the idea of competition overtook traditional companies as different startups began to adopt something similar. While traditional companies use bidding to make employees stay longer, blockchain projects are starting to adopt bidding to make their investors stay longer.
Banks often deduct transaction fees in traditional finance. A similar situation occurs in Defi, where fees are deducted after each transaction. On the Ethereum blockchain, this “fee” is better known as a “gas fee”.
There are many people involved in a project – the core team, partners, advisors and investors before the sale. Depending on the project, the team and advisors are always around 50, while pre-sale investors can go up to 4,000. With this huge number, the effort of manually distributing these tokens will consume a lot of time.
Trust is expensive in the cryptocurrency industry. Therefore, the reason for the existence and custody of all assets must be transparent. Non-automated checks usually work in such a way that the top one or two – possibly the founders – in the project have access to the wallet where the tokens are locked.
As a blockchain development company that has been around for many years, SmartOSC has built formidable white-label products for various projects.
Knowing full well that security is paramount to any testing schedule, our world-class development team has hands-on experience in building fast and accurate test portals with integrity.
If you would like to know more about SmartOSC vesting crypto, schedule a consultation with us today – click here
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