What Is the Role of Token Vesting in Preventing a ‘Soft Rug Pull’?
A 'soft rug pull' occurs when founders slowly sell off their tokens over time, causing a gradual price decline and eventual project abandonment. A transparent, locked, and gradually releasing vesting schedule prevents founders from dumping large amounts of tokens at once, making a soft rug pull harder to execute without market knowledge.
Glossar
Soft Rug Pull
Mechanism ⎊ A soft rug pull, within cryptocurrency and derivative markets, represents a gradual and often subtle extraction of liquidity from a decentralized finance (DeFi) project, differing from an abrupt abandonment.
Gradual Price Decline
Erosion ⎊ A sustained, low-velocity decrease in asset price suggests underlying structural selling pressure or a fundamental reassessment of future utility.
Token Vesting
Schedule ⎊ Token vesting, within cryptocurrency and derivative markets, represents a predetermined release of assets ⎊ typically tokens ⎊ over a defined period, aligning incentives between project teams, investors, and stakeholders.
Soft Rug
Exploitation ⎊ A soft rug is a subtle form of financial exploitation where project developers or insiders gradually sell off their substantial token holdings over an extended period, slowly draining liquidity and causing a prolonged price decline without an abrupt, single-event "hard" rug pull.