‘Liquid Vesting’ Is Oxymoronic Blockchain Feature That Lets Early Investors Sell Without Waiting

As a researcher studying the cryptocurrency market, I’ve observed that projects often implement token release schedules to mitigate the risk of sudden price drops following listings. This strategy helps prevent a potential crash caused by large sell orders from major stakeholders or insiders. Furthermore, it ensures that early backers and insiders maintain their investment in the project, demonstrating their commitment and faith in its long-term success.

Next, Colony Lab, which is a development and project nurturer within the Avalanche blockchain community, introduces a novel feature titled “liquid vesting.”

As a researcher, I would recommend exploring the option of selling or converting vested securities into cash prior to their intended vesting date. This strategy allows you to access the value of your holdings earlier, providing you with greater liquidity in the present. However, it is important to be aware that this approach may come with additional costs or taxes, and should be carefully considered before implementation.

“Early investors can exchange their tokens obtained through liquid vesting prior to investment without influencing the primary project or the secondary market,” explained Wessal Erradi, co-founder of Colony Labs.

The positive spin? “It also allows new buyers to establish long-term positions,” Erradi said.

In a press release on Tuesday, Colony unveiled its new liquid vesting feature alongside the debut of its decentralized crowdfunding platform. The goal of this platform is to broaden investment opportunities in seed-stage projects, which until now have been exclusive to a select few such as venture capitalists and wealthy individuals.

Another co-founder, Elie Le Rest, acknowledged that there are some comparable practices in conventional markets. However, he noted that such precedents aren’t as prevalent in the cryptocurrency sector.

“According to Le Rest, interviewed by CoinDesk, we possessed the necessary foundation to create something similar” or “Le Rest stated in his interview with CoinDesk that we were prepared with the essential framework for building something akin to this.”

How does it work?

According to Le Rest, “we kind of tokenized again, the vesting contracts.”

“Instead of keeping their locked tokens, users will receive a new equivalent token in a one-to-one swap. These newly issued tokens can be traded on our custom-built decentralized exchange.” (Le Rest)

As often is the case in crypto, the solution to a token problem is another token.