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How Multi-Chain Vesting Contracts can Benefit Crypto Projects

December 19, 2022

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TokensFarm Team

In recent years the number of crypto tokens has been consistently rising. The number of cryptocurrencies by the end of 2014 was 500 different coins. Today there are over 20,000 different cryptocurrencies in circulation.

The process of launching crypto tokens has also matured in recent years. Crypto projects began resembling tech start-up companies as opposed to the hobby project style of early tokens. Today the majority of crypto projects have funding rounds, both private and public, and institutional investors.

The blockchain industry takes pride in transparency and decentralization, but vesting and token distribution schedules can be unclear at times. Unclear tokenomics and schedules can fracture the trust between a project and its community.

A prime example of this is the cryptocurrency Internet Computer, known as ICP. While ICP offered innovative and complex technology behind its blockchain, the project failed to gain traction.

Internet Computer & Solana Vesting

ICP lost over 90% of its value during its first month after launch. The main reason for ICP’s loss of value was early investors and insiders selling their holdings in the project’s early days after launch.

Retail investors may have avoided ICP due to its price decline in what was a bull market at the time. Most competitors were experiencing sharp increases in value while ICP was in decline, sealing its fate at the time. With investors avoiding ICP, projects followed. Today, the blockchain remains relatively dormant, and its price has declined 99.5% since its launch.

ICP could have been a monumental success, but unclear vesting schedules and token distribution caused significant damage. While the ICP community blamed institutional investors, it is clear that untransparent vesting schedules and distribution was the true culprit.

Competitors such as Solana (SOL) gained much more traction during this period and were also funded by institutional investors. By comparing ICP to SOL, one can deduce that institutional investors such as VCs were not the problem. Instead, the vesting schedule and token distribution can be vital to early-stage projects.

Stock Vesting in Web2 Tech Companies

Vesting schedules are one of the most common ways for tech companies to incentivize their employees.

Vesting is set up so that after a period of time, typically between six months and five years, employees get stock ownership in their company. They can then sell those shares on the stock market after a period of time or keep them as an investment in the company they work for. The more time they’ve spent working at the company, the more shares they typically receive as part of their compensation package. This means that if someone leaves before they’ve vested their share of stock, they will lose out on some of their compensation package.

Multi-Chain Vesting Contracts

One of TokensFarm’s newest functionalities is a contract called “Multi-Chain Vesting”. This contract assists with the fair and transparent distribution of tokens to a crypto project’s team & early investors.

All tokens in the vesting schedule are locked securely in a tamper-proof smart contract that anyone can view. The project’s tokens are then released via the method specified by the team.

TokensFarm offers three types of token release methods: Ongoing or linear, custom, & Airdrop.

In ongoing vesting contracts, tokens are distributed continuously, block by block. New tokens are released every second, and users can claim them whenever they choose.

In custom vesting contracts, tokens are distributed in batches (portions), and the project chooses pre-defined times between each batch. The project determines when and how tokens will be released. Users can claim tokens according to the time set.

In an Airdrop vesting contract, the tokens are distributed together only once. The project will set the date, time, number of rewards, and eligible addresses.

Partial Funding Vesting Contracts

A project can use the partial funding vesting contracts feature to place just a portion of its vesting rewards in a contract. The minimum required funding is 5% of the full vesting amount. During the vesting period, the team may later contribute additional tokens to the smart contract.

Projects can utilize their tokens for other purposes thanks to partial funding.

Additionally, it can be used by cryptocurrency projects to reduce a token’s circulating supply or avoid improbable contract problems.

Benefits of Multi-Chain Vesting Contracts

The largest benefit of Multi-Chain Vesting Contracts is increasing a project’s transparency. A project can build deeper trust between its community and team by increasing verifiable transparency.

The cryptocurrency industry experienced a decline due to exchanges and projects lacking transparency. Major industry players that were considered secure options later imploded, causing massive losses of funds. Following these collapses, investors began demanding stricter transparency protocols such as proof-of-reserves. Multichain Vesting Contracts can help early-stage projects increase their trustworthiness.

Another benefit of Multi-Chain Vesting Contracts is that they are multi-chain. The contract can run on nearly EVM-supported blockchains such as Ethereum and BNB. Additionally, the team or investors can select to receive tokens on different blockchains.

The Multi-Chain Vesting contract also boosts security by requiring whitelisted addresses. This can minimize human errors, such as sending tokens to the wrong recipient.

Lastly, Multi-Chain Vesting Contracts can help a project avoid a mass sale of tokens, commonly referred to as a “dump.”

How to Apply for a Multi-Chain Vesting Contract

Multi-Chain Vesting Contracts can greatly assist early stage Web3 projects in various ways. Increasing public trust and avoiding “dumps” can make or break a project.

To apply for a Multi-Chain Vesting Contract, fill out this form.

About TokensFarm

TokensFarm is the leading cross-chain Farm-As-A-Service provider offering deployable farms that can be live within minutes. TokensFarm’s easy-to-use interface allows projects to incentivize liquidity and reduce a token’s circulating supply. Projects that use TokensFarm gain stability and exposure to around 100k unique users monthly.

TokensFarm supports all EVM chains & DEXs and doesn’t require coding or integration. At the same time, it enables crypto investors to have a one-stop shop to earn a yield on tokens.