I've noticed that many newcomers to crypto don't quite understand why vesting is needed and how it works. I'll explain because it's really important for understanding why the token price can suddenly drop at a certain moment.

Vesting is essentially locking tokens for a period of time. The project releases new tokens, distributes them to developers, founders, early investors. But not all at once, gradually, over a specified period. Before that, there's a cliff — a waiting period during which tokens are not released to the market at all.

Why is this necessary? Imagine: a founder received a million tokens during the ICO, and immediately sold them all. Other investors are left with nothing. This is called a rug pull. Vesting helps prevent this. Tokens are distributed gradually, and no one can perform such a dump.

The mechanism is simple. First, a cliff period is set — say, 6 months, during which tokens are locked. Then they start to be released in parts, for example, 5% per month. During the lock-up, investors cannot trade these tokens; they just sit in the wallet.

This offers several advantages. The token price becomes more stable because large volumes are not dumped onto the market all at once. The team and investors remain interested in the long-term development of the project, rather than quick speculation. And decentralization improves because tokens are distributed more evenly.

Here's a practical example. I remember when, in December 2023, the cliff for dYdX occurred. A huge amount of tokens that had been locked started to enter the market. Investors, employees, founders — everyone gained access to their tokens simultaneously. This created serious pressure on the price. Those who didn't follow the vesting schedule were caught off guard.

So, if you're investing in a new project, always check the vesting schedule. Find out when the cliff periods occur, how many tokens will be unlocked, and when. This can help you avoid unpleasant surprises in the market.