Overview
The Price-Based Vesting is a cutting-edge feature that enhances vested tokens by introducing a dynamic element related to some on-chain information. This innovation ensures a more responsive and fair distribution process, making it ideal for projects aiming to incentivize long-term engagement.
The on-chain information can be a KPI that matters to token-holders, and this article provides an example of when the KPI is a token price.
How It Works
At its core, the Price-Based Vesting functions like a traditional vested token, distributing tokens over time to multiple users. However, it introduces a key enhancement: the vesting duration is dynamically adjusted (e.g. based on the token's market performance relative to a predefined target price), within set minimum and maximum duration boundaries.
The maximum vesting schedule assumes the default release rate.
Traditional Linear Vesting Mechanism:
Tokens are distributed incrementally over time.
Users receive a predetermined amount of tokens at each release period, regardless of any external factors.
Dynamic Adjustment:
The release amount is determined at each release period based on how the current value of the KPI compares to the target KPI (e.g., the token's current price compared to the target price).
Benefits
Performance-Based Distribution: This mechanism benefits recipients when the token "performs well" (measured by the set KPI), creating a stronger alignment between token holders and token project success.
Incentive Alignment: Encourages long-term participation by linking unlocks to the token’s growth.
Example
If the token price is closer to (or exceeds) the target price, recipients receive more tokens (compared to what they would receive with the default release rate), effectively accelerating the vesting schedule.
Conversely, if the token price falls below the benchmark, users receive smaller amounts, effectively extending the vesting schedule.
Illustrative example with the STREAM token
Duration: 3-12 months
Target token price for minimum duration: $1
If the token price stays at or above $1 during the vesting period, the duration of vesting will be 3 months, releasing 100% of the allocation to the recipient's wallet in regular daily intervals.
If the token price is less than $1, the recipient's wallet still receives the allocation at regular daily intervals. However, the amount released per each period is less, resulting in a longer vesting period (up to a maximum of 12 months) to receive full allocation.
