Token Vesting Schedules Explained: Cliffs and Unlocks

You hold 1,000,000 tokens, yet on launch day you can move only 100,000 of them. Where are the other 900,000? They sit behind a vesting schedule, and a simple formula tells you when each one arrives.

This guide explains the three parts of most token unlock plans: the day-one unlock, the cliff, and the monthly release. You will learn to count unlocked tokens by hand and see how a catch-up clause changes the math. You will also see why the same idea shows up in employee stock grants.

The Three Parts of a Token Unlock Plan

A token vesting schedule decides when allocated tokens become usable. Team members, advisers, and early backers often receive tokens that stay locked at first. A federal overview of token design notes that tokens can be allocated to accounts with vesting periods.

Most plans that our calculator models have three parts. Each part answers one question about timing.

The TGE Unlock

TGE stands for token generation event, the launch when tokens are first created and handed out. Some plans release a set share on that day. With 1,000,000 tokens and a 10 percent TGE unlock, 100,000 tokens are free on day one.

The Cliff

The cliff is a waiting period after TGE. Nothing more unlocks until it ends. A 12-month cliff means the holder still has only the TGE amount at month 11.

The Linear Vesting Period

After the cliff, the remaining tokens release in equal monthly amounts. In our example, 900,000 tokens vest over 24 months, which is 37,500 tokens a month. The plan is fully unlocked at month 36, which is 3 years after launch.

How Do You Calculate Unlocked Tokens?

Add the TGE unlock to the vested share of the remaining tokens. Our calculator writes this as Unlocked = T x TGE + (T – T x TGE) x min(max(m – c, 0), V) / V.

Here T is the total allocation and m is the months since TGE. The letter c is the cliff and V is the vesting period, both in months. The min and max parts stop the count below zero and above the full period.

1. Find the day-one amount. Multiply the total by the TGE share. For 1,000,000 tokens at 10 percent, that is 100,000.
2. Find the remainder. Subtract the TGE amount from the total. Here 900,000 tokens are left to vest.
3. Count vested months. Subtract the cliff from the months elapsed. At month 18 with a 12-month cliff, 6 months have vested.
4. Cap the count. Use 0 when the result is negative and V when it passes the vesting period.
5. Take the vested share. Divide vested months by V and multiply by the remainder. Six out of 24 months of 900,000 gives 225,000.
6. Add the two parts. 100,000 plus 225,000 is 325,000 tokens, or 32.5 percent of the grant.

The same plan gives very different answers at other dates. At month 6, the holder still has 100,000 tokens, because the cliff has not ended. At month 13, the total is 137,500. At month 30, it reaches 775,000.

The tool page shows a second case. A holder with 500,000 tokens, no TGE unlock, a 6-month cliff, and 36 months of vesting has 250,000 unlocked at month 24. At a price of 0.50, the calculator shows 125,000 unlocked and 125,000 still locked.

Why Does a Cliff Catch-Up Clause Change the Numbers?

A catch-up clause releases all tokens that accrued during the cliff in one lump when the cliff ends. Our calculator does not model this; it starts linear vesting only after the cliff.

The two readings can split a grant very differently. Take 1,000,000 tokens with no TGE unlock and a 12-month cliff. Both plans below end at month 48.

Under catch-up, the 12 cliff months count toward the 48, so 12 out of 48 unlock at once. That jump is 25 percent of the grant on a single day. Under the linear reading, those months count for nothing, and later months carry larger unlocks.

To model a catch-up plan in our calculator, set the cliff to 0 and the vesting period to 48 months. Then read the result as 0 for any month before 12.

How Is Token Vesting Like Employee Equity Vesting?

Both use time to turn a promised grant into something the holder fully owns. The IRS describes vesting in a retirement plan as ownership that grows with years of service.

The IRS page compares two schedules for employer contributions. Under its cliff schedule, an employee owns 0 percent for 2 years and 100 percent after year 3. Under its graded schedule, ownership starts at 20 percent in year 2 and rises 20 points a year to 100 percent in year 6.

Its worked example describes an employee with 5 years of service under the graded plan. That person is 80 percent vested. A token cliff works like the IRS cliff, and linear token vesting works like a graded plan with much smaller steps.

IRS Publication 525 adds a related idea for stock received for work. It calls property substantially vested when it is transferable or no longer at substantial risk of forfeiture. That timing can matter for tax, so check the rules where you live with a qualified advisor.

The tool page adds one note on startup equity. It says equity grants often use a catch-up at the one-year cliff, which the linear model will not show.

Unlock Planning Errors and Better Habits

Most errors come from reading a schedule too quickly. The table pairs each one with a better habit.

Schedules also mix time units. A 42-month plan is 3.5 years, and our guide to converting time units from seconds to years covers those swaps. To judge the gain on tokens you bought, see how to calculate ROI instead.

Try it with your own terms. Enter your grant in the token vesting calculator and compare two cliff lengths side by side.

Token Vesting: Frequently Asked Questions

Sources and Further Reading

This article explains vesting math for general education, not financial, legal, or tax advice. Real contracts vary, so read the terms of your own grant. Reviewed for accuracy by Prof. Dr. Khalil Mudassar, PhD. Last updated September 27, 2026.