Reward Vesting Contract

An initial lock-up period during which no rewards are released, even if they are accruing. This ensures a minimum commitment period before any distribution begins.

• Purpose: Prevents immediate withdrawal upon grant.
• Example: A 1-year grant with a 6-month cliff means the recipient receives nothing for the first 6 months, then a lump sum for the accrued period.

The defined timetable and formula for releasing rewards after the cliff. It dictates the rate (linear, exponential, staged) and frequency (daily, monthly, quarterly) of distribution.

• Linear Vesting: Tokens are released in equal increments per block or per time period.
• Graded Vesting: Releases occur in large, discrete chunks at specific milestones (e.g., 25% every 6 months).

Contractual provisions that can speed up the vesting schedule under specific conditions. These are critical for aligning incentives during corporate events.

• Single-Trigger: Acceleration occurs upon one event, typically a change of control (acquisition).
• Double-Trigger: Requires two events, usually a change of control followed by termination of the recipient's role, protecting both company and employee.

Defines whether the entity granting the rewards (the benefactor) can cancel the remaining unvested allocation.

• Revocable: The benefactor can terminate the contract, often for cause (e.g., violation of terms). Common for employee grants.
• Irrevocable: The contract cannot be altered or canceled once deployed. Common for public token sales or decentralized protocol rewards.

The process by which the recipient (beneficiary) actively withdraws their vested rewards. This is typically a transaction that calls a claim() or release() function on the smart contract.

• Manual Claim: Requires user action to transfer tokens to their wallet.
• Automatic Streaming: Vested tokens are continuously transferred to the beneficiary's wallet (e.g., via Sablier or Superfluid).

Reward vesting is a foundational mechanism for long-term incentive alignment across Web3.

• Team & Advisor Allocations: Prevents immediate dumping of project tokens.
• Investor Lock-ups: Enforces holding periods after private sales or fundraising rounds.
• Liquidity Mining Rewards: Distributes protocol incentives over time to encourage sustained participation.
• Airdrops: Phases distribution to genuine users and mitigates sybil attacks.

A schedule where no tokens are distributed for an initial period (the cliff), after which a large portion vests immediately. The remaining tokens then follow a linear or graded schedule. This is common for employee equity and team token allocations to ensure commitment.

• Example: A 4-year grant with a 1-year cliff. After 12 months, 25% of the total grant vests. The remaining 75% vests monthly over the next 3 years.

Tokens vest continuously at a constant rate over the vesting period. This is the most common and predictable schedule for liquidity mining rewards and investor allocations. The recipient's claimable balance increases with each block or epoch.

• Mechanism: If 1000 tokens vest linearly over 100 days, 10 tokens become claimable each day.
• Use Case: Often used for retroactive airdrops and ongoing protocol incentives to ensure consistent, long-term participation.

Also known as tranche or periodic vesting, this schedule releases tokens in discrete chunks at specific intervals (e.g., quarterly, annually). A portion vests at the end of each period.

• Structure: A 4-year grant might vest 25% annually. After year 1, 25% is claimable; after year 2, another 25%, and so on.
• Application: Frequently used for venture capital (VC) and early investor token unlocks to manage sell-side pressure on public markets.

Vesting milestones are tied to achieving specific, measurable goals or Key Performance Indicators (KPIs). This aligns token distribution directly with contributor or protocol performance.

• Triggers: Milestones can be protocol-based (e.g., reaching a certain Total Value Locked - TVL), market-based (e.g., token price targets), or operational (e.g., product launch).
• Complexity: Requires oracles or trusted multisigs to verify milestone completion, making it less common in fully decentralized settings.

A mechanism where tokens are initially liquid but become subject to a vesting schedule if sold or transferred. This is used to prevent immediate dumping by founders or early team members after a Token Generation Event (TGE).

• Process: Founders receive tokens at TGE, but a smart contract imposes a lock-up period on any tokens they transfer to an external wallet.
• Purpose: Protects retail investors by ensuring founders' economic interests remain locked to the project's long-term success.

A continuous, real-time vesting model where tokens become claimable every second or block. This represents the most granular form of linear vesting and is enabled by Vesting Escrow contracts like those used by Curve Finance and Convex Finance.

• Advantage: Eliminates the "vesting date cliff" where large amounts unlock simultaneously, smoothing out token supply inflation.
• Implementation: Uses a per-second vesting rate calculated as total_tokens / vesting_duration_in_seconds. Users can claim their accrued balance at any time.

A reward vesting contract is a smart contract that holds and automatically distributes tokens to beneficiaries according to a predefined schedule. Key mechanisms include:

• Cliff Period: An initial lock-up period where no tokens are released.
• Vesting Schedule: The linear or non-linear release of tokens after the cliff (e.g., monthly over 4 years).
• Beneficiary Address: The wallet designated to receive the vested tokens.
• Revocation Clauses: Conditions under which unvested tokens can be reclaimed by the grantor.

Vesting contracts are a critical tokenomic security tool designed to prevent market instability.

• Prevents Immediate Dumping: By staggering releases, they protect token price from sudden sell pressure from early investors or team members.
• Aligns Incentives: Ensures contributors remain engaged with the project's long-term success to receive full rewards.
• Reduces Sybil Attack Vectors: Makes it economically non-viable to farm and immediately sell rewards from multiple wallets.

Different release schedules serve distinct economic purposes.

• Linear Vesting: Tokens release continuously (e.g., per block or per day). Simple and predictable.
• Cliff then Linear: No tokens for a set period (e.g., 1 year), then linear release. Common for team allocations.
• Step Vesting: Tokens release in large, discrete chunks at specific milestones.
• Performance-Based Vesting: Release is contingent on hitting predefined KPIs or goals.

While enhancing security, vesting contracts introduce specific technical and operational risks.

• Smart Contract Risk: Bugs in the vesting logic can permanently lock or incorrectly release funds.
• Admin Key Risk: Contracts with upgradeable or pausable features centralize risk in the admin's private keys.
• Gas Cost Inefficiency: Poorly optimized contracts can make claiming small vested amounts economically unfeasible for users.
• Oracles for Performance Vesting: Models tied to external metrics require secure oracle feeds, adding a failure point.

Vesting is standard for insider allocations to build community trust.

• Team Tokens: Often have a 1-year cliff and a 3-4 year linear vesting schedule post-cliff.
• Investor Tokens (SAFT/SAFE): Typically vest linearly over 1-3 years, sometimes with a short cliff.
• Advisor Tokens: Similar to team tokens but with shorter durations (e.g., 2-year linear vesting).
• Public Example: The Ethereum Foundation's vesting schedule for early contributors was critical for establishing long-term credibility.

Vesting contracts interact with and are distinct from other economic primitives.

• Staking vs. Vesting: Staking locks user-deposited tokens for rewards; vesting releases granted tokens over time.
• Escrow: A neutral holder of assets; vesting is a specific type of time-locked escrow.
• Token Lock-up: A broader term that can include non-programmatic, one-time locks.
• Streaming Payments: Real-time, continuous payment protocols (e.g., Superfluid) are a form of instant, linear vesting.

A cliff period is a specific duration at the start of a vesting schedule during which no tokens are released. Upon reaching the cliff date, a significant portion (often 25-50%) vests at once, with the remainder vesting linearly thereafter. Its purposes are:

• Commitment Test: Ensures the recipient remains involved for a minimum period before receiving any rewards.
• Retention Tool: A common feature in employee and contributor equity/option plans.
• Vesting Trigger: Defines the start of the linear vesting phase; if the recipient leaves before the cliff, they typically receive nothing.

Linear vesting is the most common release schedule where tokens become available continuously and evenly over the vesting period. After any initial cliff, tokens vest per block or per second. Its mechanics include:

• Constant Rate: The vested amount is a direct, linear function of elapsed time.
• Predictable Unlocks: Easy for recipients to calculate their available balance at any point.
• Smart Contract Implementation: Typically calculated as (total_amount * (current_time - start_time)) / vesting_duration.
• Contrast to Cliff-Only: Provides ongoing incentive alignment rather than a single, large unlock event.