Put simply, self-vesting is a great way to avoid paper hands, but there’s more to it
The tokensale phase of the $CHANGE ICO opened on February 28 and will close on May 31. With the ICO building momentum, we have received questions about the self-vesting option regarding token distribution after the enrollment phase, where investors pledge to purchase a given amount of $CHANGE tokens.
But, before we proceed to that, here are the ICO phases themselves.
Now, what is vesting?
Many new blockchain projects lock a certain amount of the total supply of tokens for a given period of time, restricting that batch from being sold, dumped, or otherwise distributed. This lockup period is mainly used during pre-sales or ICOs and the reasons vary, but it’s often a way to ensure that the team will stick with the project and commit to its long-term development. The tokens are then gradually released into circulation when the project has gathered speed — this is what is known as vesting.
During Phase 1 of our ICO, where investors pledge to buy a certain amount of $CHANGE, they can choose to self-vest. Self-vesting is the same as vesting, except the investor is the one doing the locking. This self-vesting period serves as a guarantee that, seeing the project’s potential and future, investors will not be tempted to sell prematurely. In crypto slang, self-vesting is a good way to avoid paper hands.
With a hard cap of $2.4M, there are two scenarios for our ICO: undersubscription and oversubscription, and the latter is where self-vesting matters.
In the case of undersubscription, i.e. not achieving our $2.4M ICO goal, investors would receive the exact amount of tokens they have pledged to buy during the first phase of the tokensale. If, say, an investor pledged to buy $10,000 worth of CHANGE tokens, then he would receive exactly that amount.
On the other hand, in the case of oversubscription during the enrollment period, e.g. a 400% oversubscription ($9.6M hard cap instead of $2.4M), a general quota reduction will come into force, reducing the amount of tokens received for everyone. Thus, if an investor pledged to buy $10,000 worth of CHANGE, then he will only get a quarter of the amount, or $2500.
However, if an investor has enabled self-vesting, then a fixed quota reduction protection of 2.5% per month would come into play. If self-vesting was enabled for a period of 6 months, then that investor would benefit from a quota reduction protection of 15% (6 x 2.5% = 15%) compared to oversubscription without self-vesting. The longest self-vesting period is 24 months, through which investors can obtain a quota reduction protection of 60% — the highest there is.
If the quota reduction due to oversubscription is 4x and your subscribed amount is $10,000, then the protection would work as follows:
🥉 0-month protection: $10,000 / 4 = $2,500 worth of CHANGE tokens released on release day;
🥈 6-month protection: $10,000 / 4 = $2,500 + ($7,500 * 15%) = $2,500 + $1,125 = $3,625 worth of CHANGE tokens released 6 months after release day;
🥇 12-month protection: $10,000 / 4 = $2,500 + ($7,500 * 30%) = $2,500 + $2250 = $4,750 worth of CHANGE tokens released 12 months after release day.
A 6-month self-vesting period thus yields a $3,625 outcome as opposed to the unprotected $2,500. As an absolute increase, the amount of $CHANGE received depends on the level of oversubscription — the higher the oversubscription is, the higher the impact of the self-vesting period. In this particular case, the 6-month protected order receives 45% more quota because of the high oversubscription. In the example with the 12-month protection, the user receives $4,750 vs $2500, which is 90% more quota.
Since protected quota is also mathematically limited by the $2.4M cap, theoretically the more vested positions are present, the higher the reduction factor for unprotected quotas.
As you can see, self-vesting is a great way to retain a larger piece of the initial pie, so to speak, diminishing the effects of reduction, and rewarding long-term holders the most. Self-vesting is, however, completely optional.
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The ChangeX team
