There are customs aimed at safeguarding the little investor even in the wild and unpredictable world of cryptocurrency trading. One of these is the vesting period, which is the period of time after an airdrop or sale of digital tokens during which early investors—founders, project contributors, and venture capital backers, for example—are prohibited from selling their stakes.Projects usually take this action to prevent the token’s price from plunging too quickly after listing, for example, in the event that significant investors decide to sell their tokens at once. Ensuring insiders and early donors maintain a stake in the project is another objective—a kind of pledge of good faith.
Now comes a new feature from Colony Lab, a developer and project incubator in the Avalanche blockchain ecosystem, called “liquid vesting.”
It is essentially a workaround, which explains why it sounds that way. Take your luggage and hold on to them. You don’t have to wait for the vesting period to end to take advantage of liquidity.
“Liquid vesting allows early investors to trade their tokens before they invest without impacting the projects, without impacts in the secondary market, ” said Wessal Erradi, co-founder of Colony Labs.
The positive spin? “It also allows new buyers to establish long-term positions,” Erradi said.
Colony announced the liquid vesting feature Tuesday in conjunction with the launch of its decentralized fundraising platform, which has the stated aim of “democratizing access to seed sales investments 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 follows Colony’s announcement in November of its $10 million investment in the Avalanche blockchain ecosystem, which included the purchase of over 500,000 AVAX tokens for a validators program for AVAX holders. Another co-founder, Elie Le Rest, stated that while there is some precedent for this in traditional markets, “not that much” exists in cryptocurrency.
“We had the infrastructure to be able to build something like this,” Le Rest said in an interview.
According to Le Rest, “we kind of tokenized again, the vesting contracts.”
“So we issue a new token, one-to-one, that matches the ones that are locked, and then we distribute that to the users,” Le Rest said. “And then they can basically trade that on our decentralized exchange that we built.”
As often is the case in crypto, the solution to a token problem is another token.