Colony Lab introduced “liquid vesting” to permit early Avalanche investors to exchange tokens prior to the vesting period ending in order to stabilise the market.
TakeAway Points:
- In an effort to safeguard project values and market stability, Colony Lab provides “liquid vesting,” which permits early cryptocurrency investors to exchange tokens before the vesting period’s expiration.
- This feature is part of the debut of Colony’s decentralised fundraising platform, which aims to make early-stage investments more accessible to anyone other than affluent individuals and venture capitalists.
- Issuing fresh tokens that correspond with locked ones facilitates liquid vesting and allows trade on Colony’s decentralised market.
Presenting Liquid Vesting
The Avalanche blockchain ecosystem’s leading developer, Colony Lab, has introduced a new idea known as “liquid vesting.” Founders, project contributors, and venture capital backers are among the early investors who can trade their tokens before the vesting term ends thanks to this novel strategy that gets around the restrictions associated with typical vesting periods.
The liquid vesting mechanism, according to Wessal Erradi, co-founder of Colony Labs, is designed to permit these transactions without having a negative impact on the projects or moving the secondary market.
“Liquid vesting allows early investors to trade their tokens before they invest without impacting the projects, without impacts in the secondary market.” Erradi said.
This innovation attempts to strike a compromise between the market value of the token and early investors’ desire for liquidity.
Democratising Financial Possibilities
Liquid vesting was announced at the same time as Colony’s decentralised fundraising platform launched. The goal of this platform is to “democratise access to seed sales investments in early-stage enterprises,” as they were previously exclusively available to a small number of high-net-worth people and venture capitalists (VCs). By removing these obstacles, Colony Lab is enabling a wider range of investors to take part in the initial phases of project development inside the Avalanche ecosystem. This project is a continuation of Colony’s $10 million investment in the Avalanche blockchain ecosystem, which shows their dedication to promoting development and innovation.
Liquid Vesting’s Working Mechanism
According to the report, Elie Le Rest, a fellow Colony Lab co-founder, clarified the workings of liquid vesting.
“We had the infrastructure to be able to build something like this… we kind of tokenized again, the vesting contracts. So we issue a new token, one-to-one, that matches the ones that are locked, and then we distribute that to the users. And then they can basically trade that on our decentralized exchange that we built.” Elie Le Rest said.
One new token per person that is identical to the locked tokens is issued as part of this process. After then, users receive these freshly created tokens, which they can swap on Colony’s decentralised market. With this approach, liquidity is made possible even while the original tokens are locked away by introducing a secondary token that symbolises the vested assets. Though there is some precedent in traditional markets for this, Le Rest emphasised that Colony Lab’s approach is novel and that it is relatively uncharted area in the cryptocurrency space.
