Blockchain
“Liquid vesting” is an oxymoronic feature of blockchain that allows early investors to sell without waiting
Even in cryptocurrency trading, anything goes, there are conventions designed to protect the little guy. One of these is the vesting period, a window of time following a digital token sale or airdrop in which early investors, such as founders, project contributors and venture capital backers, cannot unload their allocations.
Projects typically do this so that the price of that token doesn’t collapse immediately after a listing, for example if large stakeholders were to sell immediately. Another goal is to make sure that insiders and early supporters keep their stake in the game, a guarantee of good faith, so to speak.
Now comes a new feature from Colony Lab, a developer and project incubator in the Avalanche blockchain ecosystem, called “liquid vesting.”
If it seems like a workaround, that’s because it basically is. Hold your bags and hold them too. Get liquidity now, without having to wait for the end of maturation period.
“Liquid vesting allows early investors to trade their tokens before investing with no impact on projects, no impact on the secondary market,” said Wessal Erradi, co-founder of Colony Labs.
The positive turning point? “It also allows new buyers to establish long-term positions,” Erradi said.
Colony announced the liquid vesting feature on Tuesday in conjunction with the launch of its decentralized fundraising platform, which has the stated goal of “democratizing access to seed investment in early-stage projects, previously limited to a select group, including VCs and high-net worth individuals,” the team wrote in a press release.
The launch comes after Colony shared it in November invested $10 million in the Avalanche blockchain ecosystem, purchasing more than 500,000 AVAX tokens, which went into a validation program for AVAX holders.
Elie Le Rest, another co-founder, said there is some precedent for this in traditional markets, but “in cryptocurrencies, not so much.”
“We had the infrastructure to be able to build something like this,” Le Rest said in an interview with CoinDesk.
According to Le Rest, “we have tokenized vesting contracts again.”
“Then we issue a new token, one by one, that matches the blocked ones, and then we distribute it to users,” Le Rest said. “And then they can basically trade it on our decentralized exchange that we created.”
As is often the case in the cryptocurrency industry, the solution to the token problem is another token.