So, you’ve decided to dive into crypto investing. Maybe you’ve found a promising new project, or you’re launching your own token and want to avoid watching your co-founder cash out and disappear to a remote island before the product is even built. Enter vesting and cliffs—the financial leash that keeps everyone behaving (mostly).
Vesting is basically a delayed gratification mechanism that forces token recipients (like founders, team members, and investors) to earn their tokens over time. This prevents the classic “pump-and-dump” scenario where insiders dump their holdings the moment the token hits the exchange, leaving retail investors to hold a bag heavier than their hopes and dreams.
Think of vesting like a crypto diet plan: instead of gorging on an all-you-can-eat buffet of tokens on Day 1, you get them in controlled portions over time. This ensures that everyone involved has long-term incentives to actually work on the project, rather than taking the money and running (looking at you, 2017 ICOs).
A cliff in vesting is a period where you get absolutely nothing. Zero. Zilch. Nada. It’s like being in a serious relationship where you don’t get a key to the apartment for at least a year—you need to prove you’re committed first.
Cliffs usually last anywhere from 6 to 12 months, ensuring that people don’t join a project, contribute a single line of code (or just show up to one Zoom meeting), and then vanish with their tokens. After the cliff period, vesting starts, and tokens are released gradually—like getting paid in slow-motion Monopoly money that eventually turns into real money.
If you’re launching a project, here’s a foolproof strategy to avoid disaster:
Set a Vesting Schedule – Typically, tokens vest over 3-4 years, keeping teams motivated and rug pulls at bay. Nobody should be allowed to cash out overnight unless you want your project to become the next cautionary tale.
Include a Cliff – This ensures that only people who stick around for the long haul get rewarded. It’s like a dating probation period for your token holders—only serious relationships allowed and go to the next stage.
Apply to Advisors Too – Just because someone tweets about your project doesn’t mean they should get a free allocation of tokens on Day 1. Make them earn it, just like everyone else.
Don’t Forget Smart Contracts – Vesting schedules should be enforced through smart contracts, not backroom handshakes. Crypto is all about decentralization, so let the code do the work instead of relying on “trust” (we all know how that ends).
Vesting and cliffs aren’t just bureaucratic annoyances—they’re essential to making sure crypto projects don’t implode before they even get started. If you’re in crypto investing, always check if a project has a proper vesting schedule. If it doesn’t, you might just be buying someone’s Lambo instead of funding actual development.
So, embrace the delayed gratification. Your future, less-rugged self will thank you!
Fabian Owuor
