Liquid Vesting
Last updated
Last updated
In addition to Colony's Early-Stage fundraising feature, which operates fully on-chain and with high scalability, allowing hundreds of fundraisings to occur simultaneously, Colony introduced a revolutionary solution called Liquid Vesting.
Seed and private sales allocations often come with extended lockups and vesting schedules, in exchange for access to tokens at a low price. With Colony's Liquid Vesting, early-stage projects' investors can now securely trade their locked/vesting tokens on our AMM (Colony's DEX) without limitations. This introduces a new era of flexibility and liquidity to the primary market.
With Liquid Vesting, early investors gain the flexibility to trade their early-stage allocations even when the tokens are locked in a vesting contract and not yet available for public trading. This feature allows investors to engage in trading activities before the tokens fully vest, without disrupting the secondary market. Meanwhile, new buyers can take advantage of this opportunity to establish long-term positions. The entire Liquid Vesting process operates on-chain and in a trustless manner, ensuring transparency and security for all participants.
The Liquid Vesting solution relies on the creation of ceTokens, which are generated by Colony for each Seed/Private sale conducted on the platform. These ceTokens are specifically designed to mirror the tokens locked within the associated vesting contract of a Seed/Private sale. They serve as a representation of a user's complete unlocked allocation from a specific Seed/Private sale, granting users the right to claim the project's native token based on the current state of the vesting contract.
In the Portfolio section, the final stage of a fundraise on the Early-Stage Program, users can claim their ceTokens, trade them on Colony's DEX, provide liquidity, stake LP to receive boosted APR (in ceTokens), or swap their ceTokens for the project's native token, depending on the project's vesting schedule.
For a detailed explanation of how ceTokens function, please refer to the dedicated section below:
An integral component of the Liquid Vesting mechanism is Colony's Decentralized Exchange. Colony's DEX serves as the foundation for deploying liquidity and facilitating the trading of ceTokens. It plays a pivotal role in enabling the functionality of the Liquid Vesting Mechanism. For further details on this topic, please refer to the information provided below.
The Liquid Vesting feature incorporates several mechanisms designed to ensure its sustainability and align incentives with Colony's long-term model. One crucial element is the Long Term Incentives, which penalizes early claimers on the vesting contract while rewarding late claimers. This mechanism encourages users to adopt a long-term perspective towards projects fundraising on the platform. Such an approach is vital for attracting more projects to Colony, as they can trust that Colony's community will not engage in token dumping due to user incentives to HODL. The implementation of the Long Term Incentives solidifies Colony's position as a long-term participant in the Avalanche ecosystem, making it an attractive investor for projects conducting seed and private sales.