When a crypto project launches a token, only part of the supply can be traded on day one. The rest is reserved for founders, employees, investors and ecosystem funds, and it is released over months or years on a preset schedule. That process is called vesting, and the release dates are among the most watched events in a token's life.
What Vesting Means
Vesting is a time-based release of tokens. Until tokens vest, the holder cannot sell or transfer them. The idea comes from startup equity, where employees earn their shares over several years so they have a reason to stay.
In crypto, vesting serves two purposes. It ties the team and early backers to the project for a longer period, and it stops a large part of the supply from being sold in the first days of trading.
Stock markets have a similar arrangement. After an initial public offering, insiders are usually barred from selling for a set period under a lockup agreement, as the SEC's Investor.gov explains in its page on IPO lockup agreements. The difference is that token schedules are set by the project itself, and disclosure standards vary widely.
Cliff and Linear Schedules
Most schedules are built from two elements.
- Cliff: a waiting period during which nothing is released. When the cliff ends, a batch of tokens becomes available at once.
- Linear vesting: tokens are released in equal steps, such as every month or every block, over a set period.
The two are often combined. A common structure for team allocations is a one-year cliff followed by monthly releases over the next two or three years.
A simple example: an investor holds 1,200,000 tokens with a 12-month cliff and 24 months of linear vesting after it. For the first year the investor receives nothing. From month 13, 50,000 tokens become available each month until the full amount has been released at month 36.
Some schedules also include an amount released at the token generation event, often shortened to TGE, which is the moment the token first exists and starts trading.
Who Has Vested Tokens
- Founders and team members, who usually have the longest schedules
- Seed and private round investors
- The project treasury or foundation
- Ecosystem and community funds, used for grants and incentives
Buyers in a public sale and airdrop recipients often receive their tokens with no vesting at all. Private investors usually paid a much lower price and wait longer.
How Vesting Is Enforced
There are two methods, and the difference matters.
On-chain vesting places the tokens in a smart contract that releases them by date. Anyone can inspect the contract and confirm the schedule.
Off-chain vesting relies on a legal agreement or on a custodian holding the tokens. Outsiders cannot verify it, and the terms can be changed by the parties involved. A schedule shown in a slide deck is a promise, not a guarantee.
Why Token Unlocks Affect Price
The moment vested tokens become transferable is commonly called a token unlock. Large unlocks are published in advance, and traders watch the dates closely.
When tokens vest, the circulating supply grows. If the recipients sell, the extra supply can push the price down. The effect depends on several things:
- The size of the release compared with normal daily trading volume
- Who receives the tokens. Investors sitting on large gains have more reason to sell than a foundation funding grants.
- The price those holders paid compared with the market price
- Overall market conditions at the time
Not every release leads to selling. Some holders keep their tokens. Some move them straight into staking. There is no reliable rule.
Circulating Supply and Fully Diluted Value
Two numbers show how much vesting is still ahead.
Market cap is the price multiplied by the circulating supply. Fully diluted valuation, or FDV, is the price multiplied by the total or maximum supply, including everything still held back.
A token with a market cap of $100 million and an FDV of $1 billion has only 10% of its supply in circulation. The other 90% will arrive over time. For the price to stay the same, new buyers must absorb all of it. A token with 80% already circulating has far less dilution ahead.
Team and investor schedules are not the only source of new supply. Staking rewards and incentive programs issue tokens continuously. Burns work in the other direction. All of these together make up the full supply picture.
How to Check a Vesting Schedule
Start with the project's own documentation or whitepaper. In the European Union, the MiCA regulation requires issuers of many crypto assets to publish a white paper with defined content, and the ESMA page on MiCA describes the framework.
Look for:
- The percentage of supply allocated to each group
- The cliff length and vesting period for each allocation
- Whether vesting is enforced by a contract you can inspect
Risks and Common Mistakes
- Looking only at market cap. A low market cap with a very high FDV means heavy dilution is still coming.
- Assuming a published schedule cannot change. Projects have extended, shortened and restructured vesting through governance votes or team decisions.
- Forgetting that held-back tokens can sometimes be staked. Rewards earned on them may be free to sell even while the principal is not.
- Ignoring unclear disclosure. If a project will not say who holds the supply and when it is released, that is a warning sign. The SEC's Investor.gov crypto assets page collects the regulator's alerts and bulletins on crypto asset risks.
Nothing in this article is financial advice.
Track on CoinMarketGuy
Each coin page shows market cap, circulating supply and total supply, which is enough to see how much of a token is still held back. The Sui page is one example of a token with a multi-year release schedule. For newly launched tokens, the airdrops page lists current distributions and the trending page shows what people are searching for.