Even in crypto trading, there are conventions designed to protect the little guy. One of these is the vesting period – a period of time after a digital token sale or airdrop in which early investors, such as founders, project contributors and venture capital backers, are excluded from dumping their allocations.
Projects typically do this so that the price of that token doesn’t crash immediately after a listing, for example if major stakeholders were to sell immediately. Another goal is to ensure that insiders and early backers remain involved 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 sounds like a solution, that’s because it basically is. Make sure you have your bags and keep them safe. Get liquidity now, without having to wait for the end of the vesting period.
“Liquid vesting allows early investors to trade their tokens before investing, without impacting the projects, without impacting the secondary market,” said Wessal Erradi, co-founder of Colony Labs.
The positive spin? “It also allows new buyers to take long-term positions,” Erradi said.
Colony announced the liquid vesting feature on Tuesday in conjunction with the launch of its decentralized fundraising platform, which aims to “democratize access to seed investments in early-stage projects, which were previously limited to a select group, including venture capital funds and high -net investments. valuable individuals,” the team wrote in a press release.
The rollout comes after Colony shared it in November it invested $10 million in the Avalanche blockchain ecosystem by purchasing more than 500,000 AVAX tokens, benefiting a validator program for AVAX holders.
Elie Le Rest, another co-founder, said there is a precedent for this in traditional markets, but “in crypto, not so much.”
“We had the infrastructure to build something like this,” Le Rest said in an interview with CoinDesk.
How does it work?
According to Le Rest, “we have symbolized the acquisition contracts a little again.”
“So we issue a new token, one-for-one, that matches the token that is 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 is often the case with crypto, the solution to a token problem is another token.
Read more: AVAX Ecosystem gets $10 million boost from Avalanche Accelerator Colony Lab