Clear DefinitionsCliff
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Pronunciation
[klif]
Analogy
Imagine climbing a cliff before reaching a long, gently sloping path downwards. The 'cliff' in vesting is that initial steep climb (or waiting period) you must complete before you start getting any benefit (vested tokens). Once you reach the top of the cliff (pass the cliff date), you might get access to all the ground you 'covered' during the climb (the first chunk of tokens), and then you start walking down the gentle path (linear vesting begins).
Definition
In a token vesting schedule, the cliff is an initial period during which no tokens are released or earned by the stakeholder. Only after this cliff period expires does the vesting (gradual release) of tokens begin, often with an initial lump sum release corresponding to the cliff duration.
Key Points Intro
A cliff ensures a minimum commitment period before any vested tokens become available.
Key Points
The initial lock-up duration within a vesting schedule before any tokens vest.
If a stakeholder leaves before the cliff period ends, they typically receive no tokens.
Once the cliff is reached, the tokens corresponding to that period often vest immediately.
Common cliff durations are 6 months or 1 year.
Designed to ensure a minimum level of commitment from team members or investors.
Example
In a '4-year vesting with a 1-year cliff' schedule, an employee receives 0 tokens during the first 12 months. On their 1-year anniversary, 25% of their total token allocation vests immediately. After that, the remaining 75% vests incrementally over the next 3 years.
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