Top 5 Token Unlock Strategies in Crypto You Must Know

Deep Dive into the Top 5 Token Unlock Events Reshaping Web3

The blockchain and Web3 ecosystem is in a constant state of evolution through innovation, but one key aspect to influence project mechanics and trader strategy is “token unlocks.” Token unlocks describe the token scheduled release of tokens that were previously locked or vested—typically for founders, early investors, teams, or some ecosystem incentive—into the circulating token supply. 

This is a basic mechanism, but it can have significant implications for token price trends, investor confidence, or the development narratives of many crypto projects.

To better conceptualize the importance of token unlocks, let’s look at how four known projects—Fasttoken, Ondo Finance, Bitget Token, and WhiteBIT—treat this subject.

Definition of Token Unlock

A token unlock refers to a situation in which tokens that were previously unavailable or could not be traded are now accessible for trading or participation. In most cases, these tokens are distributed to core team members, investors, and partners or used to incentivize ecosystem growth but require a lockup period (i.e., a vesting period) to stabilize the project and maintain stakeholder commitment. When the locked-up tokens are slowly released or "unlocked", the circulating supply increases. This supply increase can affect the token price, liquidity, and governance elements of the project.

Fasttoken and the Strategy Behind Its Unlock

Fasttoken is the native asset of the Fastex Web3 ecosystem and a utility token that is used for payments, rewards, and governance across Fastex. In typical Fasttoken fashion, it has devised a strategy to issue its tokens over several months and even years through a token unlock schedule. 

The scheduled unlocking of tokens mitigates the amount of supply that the market will absorb at one time, eliminating sudden price drops, injured markets, and diminishing community interest. The idea is to encourage early contributors to do something, even if they are not actively engaged in the project, while providing price stability which can help grow reputation and contribute to continuing participation. 

Holders receive rights to governance participation, discounted transaction fees, and a preferred access during ecosystem campaigns. 

Ondo Finance: DeFi Innovations Linked with Token Unlocks

Ondo Finance has set itself apart by doing innovative work with tokenized real-world assets (RWAs), along with liquidity solutions as well. The native token ONDO, is key to participating in governance of the protocol and is also used as a reward incentive for providing liquidity within the protocol. The token unlock schedule for Ondo Finance follows a very common pattern that many DeFi projects replicate, which is having an initial distribution of tokens to the community via airdrops and then moving toward a vesting period for investors and team members. 

Token unlocking events are important processes for maintaining fairness and alignment of incentives set forth for users, developers and investors to engage with governance and continued development. 

Bitget Token (BGB): Unlocks Tied to Utility

The native utility token of the Bitget exchange is Bitget Token (BGB) and it serves primarily to assist active engagement and participation in trading, governance activities, and types of ecosystem benefits. Bitget’s tokenomics feature clear unlock schedules that are written in an effort to specify understandable unlock processes to create transparency around token utility. The unlocking of tokens is directly-matched with real-world application on the Bitget platform including reducing trading fees, attending exclusive events, receiving staking rewards, and voting with utility tokens.

BGB’s progressive token unlocks drive the growth of the Bitget ecosystem, bringing additional value to retail and institutional users. 

WhiteBIT: Token Unlocks that Drive Growth and Products

WhiteBIT, one of Europe's leading exchanges, leverages its native token, WBT, to provide fee discounts, staking, and voting rights to customers. Tokens designated for team, foundation, or marketing efforts have a set vesting schedule as a means to keep important members of the community aligned with the long-term outlook of the project.

Every unlocked token from WhiteBIT is publicly communicated to the community, sometimes it correlates with the launch of new features or marketing programs. This transparency approach grounds WhiteBIT’s history of compliance and stability and promotes and reiterates WhiteBIT’s history of innovation. 

The Graph (GRT): Decentralized Data Access for the Web3 Experience

The Graph (GRT) is a decentralized protocol to improve the accessibility of blockchain data and for developers and dApps to access and utilize that data, specifically across blockchain networks and Ethereum. 

The Graph is often referred to as the "Google of blockchains" because it provides indexing capability on the blockchain for data that can then be queried using publicly accessible APIs called subgraphs.

 GRT is the native token of The Graph protocol and is an ERC-20 asset that serves a critical function in maintaining the economic integrity of the protocol and the reliability of the blockchain data being provided. 

The economic model allows for Query Fees and reward functions to incentivize engagement and support network performance. GRT holders will also have a governance role in the protocol and vote for upgrades and other initiatives to help govern the decentralized evolution of the protocol and support economically fair compensation for stakeholders.

 The Graph has a clear and transparent vesting schedule, community driven development and a strong incentive model to allow it to serve as a layer of internet infrastructure to serve thousands of dApps and allow seamless access to blockchains and the data that exists within them.

Why Token Unlocks Matter:

Although token unlocks can certainly  provoke fear and anxiety with respect to price behavior, they are essential: 

• Transparency: The publicly available schedules instill confidence for market participants who learn in advance what future token releases and supply conditions are. 

• Incentive alignment: unlocking tokens awarded to teams, advisors and investors gradually helps guarantee all parties have skin in the game and vested interests for several years in the success of the project. 

• Ecosystem extension: unlocking tokens for the purposes of rewards, air drops, and community build consumption can increase user adoption and network effects. 

• Governance participation: The more tokens unlock and circulate, the more gene pool participants can play a role in governing the protocol taking a shared responsibility for governing the community towards decentralization. 

Variables for Investors to Consider

• Investors should pay attention to future token unlocks when evaluating the health of a project. If larger token unlocks cause large consumers to sell into circulation, the sell pressure will exert downward pressure on pricing. If a well thought out plan exists, with strong fundamentals and community present, token unlocks can allow for healing and growth. Investors should take note of, but not limited to. 

• Total supply post unlocking, comparing circulating supply to total supply. 

• Tokens held by insiders versus sold to the public. 

• The team’s transparency and communication practices about the unlocked schedule and the intent to use the unlocked tokens.

Recommended Practices for Crypto Projects

Successful projects, like Fasttoken, Ondo Finance, Bitget Token, and WhiteBIT, tend to follow a few recommended practices, such as: 

• Clearly defined vesting and unlock schedules from the beginning. 

• Announcing unlocks in a timely fashion in the public calendar. 

• Timing token unlock with project deployment, such as a feature release or staking incentives.

• Use deflationary mechanisms- such as buybacks and burning tokens to offset the inflationary pressure from the unlock events. 

For example, Bitget unveils its unlock calendar on a regular basis, synchronizes unlocks with product improvement (e.g. new staking pools or governance), and institutes periodic token burns to sustain scarcity. The symbiotic ecosystem embodies a favorable historical relationship between token holders and sustainable supply & demand. 

Conclusion: The Balance of Token Unlocks

Ultimately, managing token unlocks is just one aspect of responsible management in a crypto project. By pacing token unlocks appropriately, aligning incentives among stakeholders, and timing unlocks around significant milestones, projects establish healthy ecosystems and trusted communities.  For the investor, transparency in the token unlock process provides worthwhile context for decision-making. 

Projects like Fasttoken, Ondo Finance, Bitget Token, and WhiteBIT delineate best practices for crypto projects in 2023: gradual token unlocks, clear announcements, governance-focused incentives, and sustainable value generation.