Token vesting is a mechanism by which tokens allocated to team members, advisors, or early investors are released gradually over time rather than all at once. Vesting schedules are designed to align incentives, ensuring that founders and contributors remain committed to a project for the long term.
A typical vesting schedule might include a cliff — a period before any tokens are released — followed by linear vesting over subsequent months or years. For example, a one-year cliff with four-year linear vesting means no tokens are released in the first year, then 25% are released at the end of year one, and the remaining 75% vest linearly over the next three years.
Investors and traders carefully analyze token unlock schedules because large unlocks can create significant selling pressure. Tools that track upcoming vesting events help traders anticipate potential price movements and make more informed decisions about entry and exit timing.