New cryptocurrency projects spring up regularly, each seeking capital. It is now increasingly common for these projects to offer tokens during crowdfunding or coin offering events.
The value of these tokens fluctuates over time and is determined by various factors, including supply and demand. The acquisition of cryptocurrencies is used as a way to stabilize this value. But what exactly is a cryptocurrency grant?
What is the acquisition of cryptocurrencies?
Cryptocurrency granting occurs when tokens are locked up for project members and early investors for a specified period of time, only to be released afterwards.
In the traditional financial landscape, it is common for companies to offer stock to employees. However, if these employees access or withdraw their shares simultaneously, it can create selling pressure and drag down share prices. As a result, companies often use vesting to delay ownership and use of promised assets. Crypto vesting is the crypto version of this.
It can be likened to a tentative rewards package to be given to the first contributors to a crypto project once it has a foothold.
How does cryptographic vesting work?
The crypto grant employs smart contracts to release held tokens when a project reaches certain pre-defined milestones. Milestones, defined by the founding members of the project, can be based on duration (the time elapsed since the project started) or on stages (the completion of specific stages of the project).
An allocation schedule is used to achieve time-limited release of held tokens. This schedule details the duration and percentage of the token that will be paid out to each initial investor and the time from which they can sell the tokens they hold since the initial coin offering (ICO) period.
The time frame of the release is called the token lock or vesting period. This period can range from six months to a few years after the token’s introduction to the market. Acquisition schedules allow for the release of a certain percentage of the token held after every six to eighteen months or even longer.
In the simplest terms, the cryptocurrency grant works by locking up tokens for a predetermined period. During this time, you cannot access the award amount until the award period has expired.
Crypto Acquisition Timelines: How Tokens Are Released
The cryptocurrency grant schedule is an integral part of a project’s roadmap, allowing investors, employees, and other stakeholders to plan when they will receive their coins. The typical award schedule begins with an award start date and several award periods of varying lengths.
After the Consolidation Start Date, each period will end on the applicable Consolidation End Date. At the end of each vesting period, you can access the assets assigned to you, based on the terms of the agreement. After the defined period, you will receive the agreed percentage of tokens in your cryptocurrency wallet. These released tokens can now be traded, sold, bartered, or held, depending on your wishes.
Depending on frequency and size, award schedules can be linear, gradual, or steep. Today, there is even the use of third-party programs to carry out automatic granting.
Cliff’s vesting schedule
The cliff is the period from the start of a vesting period to the transfer of the first set of tokens. While not all token projects use the cliff allotment schedule, it is generally used with linear or gradual allotment schedules to release purchased tokens.
No tokens are released on the cliff award schedule. In fact, long time frames are the norm in bluff award schedules. And, if you withdraw your funds before the agreed date, you will lose all rights to the purchased tokens.
This reduces the likelihood of pump-and-dump attacks, where people buy into a token early only to suddenly pull out, thus collapsing the value of said token.
Graduated Acquisitions Schedule
As the name implies, purchased tokens are released in degrees, each one higher or lower than the last. A defined time interval is established between releases on a gradual award schedule.
A certain percentage per degree is added with each time interval. For example, 20% of purchased tokens can be paid after the first six months; 35% is paid after one year. In eighteen months an additional 25% will have been paid. The final 15% is paid at the end of the second year, completing the release.
This staggered release format slowly introduces tokens to the market, manipulating and reducing volatility risk. Here, if you withdraw, you will only be entitled to the percentage according to your waiting time.
Linear vesting schedule
The linear allocation schedule is the allocation of the allocated tokens in equal parts over a predefined period. Here, we might have 20% paid in the first quarter, then another 20% in the next three months. In this way, the entire lot is amortized in one year and three months.
Who are the parties involved in a cryptographic rights grant schedule?
When it comes to the grant of cryptographic rights, there are three key parties involved: the company offering the grant, the investor, and the beneficiary.
The company offering the award is responsible for establishing the award schedule and establishing the applicable rules and regulations. They will also need to develop a plan to ensure the beneficiary meets its obligations and reaps the rewards promised.
The investor is usually an individual or a group that invests in a project and the token being offered. They can also provide additional funding for the project, as well as guidance and support.
Finally, the beneficiary is the individual or group that receives the benefits of acquisition. They are responsible for meeting their obligations under the award agreement, such as completing specific tasks or milestones, and must be willing to comply with all associated rules and regulations.
Each of these parties plays a vital role in a successful cryptocurrency grant program, and working together can help ensure that everyone involved gets what they want out of the deal.
5 Benefits of Crypto Acquisition
The cryptocurrency grant only exists because of its large number of benefits for investors, token projects, and token developers.
1. Reduces the risk of market manipulation
The vesting ensures that no investor or project developer rushes to flood the market as soon as the crowdfunding period ends. They also can’t play with the chip supply by hoarding them, creating an artificial hyperscarcity. The lower risk of market manipulation makes it easier to identify scams that generate worthless coins after obtaining funds from investors.
2. Encourage Commitment
The cryptocurrency lease works by purposefully delaying the release of project tokens to owners, which builds resilience and commitment to see the project grow into everything it was designed to be. It gives the incentive to stick around and play the long game, with the assurance of rewards after the long wait.
3. Promotes decentralization of tokens
The acquisition of cryptocurrencies is aimed at creating a secure and decentralized cryptocurrency network, for which time is required. It gives developers much-needed time to continue working on a token with intrinsic value.
4. Reduce the risk of market fluctuations
Vesting helps distribute tokens in such a way that a large portion of the project’s tokens are not improperly held by a single person or a small number of people. This single person or small group can easily create fluctuations in market supply if left unchecked. These market fluctuations are detrimental to the value of the token and cause losses for retail investors.
5. Great Investment Opportunity
Cryptocurrency acquisition allows you to invest in cryptocurrency while retaining ownership until you sell or trade it. Once he participates in the ICO of a token that he believes has potential, it makes him one of the first investors entitled to purchased tokens. These tokens can be sold later, giving you a great return on your investment.
Take advantage of the benefits of Crypto Vesting
There are numerous advantages to cryptocurrency acquisition for a cryptocurrency investor, a process that is expected to become a standard component of cryptocurrency launches. By learning about the practice, benefits, and features of cryptocurrency granting, you can ensure that you can make sound financial decisions when offered the opportunity to invest in a cryptocurrency project.