The unlock that reshapes supply curves
A vesting cliff is a period where tokens are locked entirely, followed by a release date where a block of tokens becomes liquid. For example, a two-year cliff followed by three-year linear vesting means founders cannot touch their tokens for two years, then 1/36 of the remaining vests monthly for 36 months.
This structure aligns incentives: founders are locked in. But markets dislike cliffs; the lock-up period is a period of uncertainty, and traders price in the probability of a dump post-unlock. Many founders and investors sell immediately after their cliff passes.
Cliff dumps and timeline risk
A cliff on a major holder's allocation can create predictable sell pressure. If a project's timeline shows that 40% of team tokens unlock in Q4, traders can anticipate selling pressure in that quarter. Smart projects stagger cliffs and linear vests to avoid a single explosive unlock date.