Cryptocurrency hosting is the process of reserving a certain amount of assets for a certain period of time. At the end of this period, holders can access their assets and dispose of them at their discretion. Projects use this strategy during ICOs and other fundraising events. Its purpose is to encourage long-term commitments from investors, community and developers, and to stop mass token sales. A cryptocurrency exchange can be used for this strategy.
The mechanism was inspired by traditional financial practices that gave employees stock rights in exchange for their commitment to the company. At what point did the cryptoworld decide to adopt this strategy? It is impossible to determine this reliably, but there are many examples of its implementation. Among them is the Ethereum ICO (2014), which used vesting schedules to ensure that founders and developers would stay with the project for as long as possible. The Cardano team (ADA) used this strategy to unite the interests of investors with the goals of the project. In addition, the creators of Polkadot used this idea to prevent an oversupply of tokens on the market and keep the price down. Even WhiteBIT Coin (WBT) has used this approach. In recent years, vesting has become very popular among both large projects and new players.
Characteristics of vesting
This strategy is necessary for projects to protect themselves. Its key features include a clear timeline for token distribution, a cliff period during which assets remain blocked, and mechanisms for gradual and conditional unblocking. In addition, smart contracts are used, which are needed to ensure transparency and avoid manipulation. Sometimes projects conduct coin burns to stabilize the price.
How the cryptocurrency vesting chart works
We have already dealt with the fact that cryptocurrency vesting is reserving tokens for a certain period of time and unlocking them at the right moment according to the schedule. But how does this process take place?
Unlocking schedules usually depend on the roadmap of the projects. They help investors and other stakeholders understand when to expect unfreezing of funds.
Smart contracts help the schedules function. They are programmed to hold assets until project conditions are met. These conditions can vary. They depend on many factors, among them the completion of a certain milestone or the generation of the required revenue. Vesting periods can last from a few months to several years.
Mechanisms issue a certain number of tokens when all necessary conditions are met or a certain point in time is reached. Once the assets are unlocked, holders can do whatever they want with them: sell, exchange, invest, etc.