Vesting & Unlocks

For technical documentation, see TokenTimelock

All shares in Mezzanine can be vested by anyone, including other smart contracts. For example, both the Payroll Manager and Priced Rounds support the vesting of shares that are distributed to employees and investors, respectively. The initial version of Mezzanine will only support linear vesting schedules with a cliff.

When shares are vested, an NFT is minted to the recipient. Vested shares can be claimed on behalf of the owner of the NFT by any account. For example, if Alice has 1,000 shares vesting over a year, Bob can claim Alice's shares on her behalf (to her wallet) at any time. The NFTs are not soulbound and can be transferred to any account. Once transferred, the sender gives up all rights to vesting shares.

Only a company's shares can be vested in the given company's token timelock. For example, company Foo's shares cannot be vested in company Bar's token timelock.

Vesting in Mezzanine can be obligatory or non-obligatory. Non-obligatory vesting can be canceled by the board of directors and admin departments while obligatory vesting cannot be canceled by anyone except the token owner. Obligatory vesting is used for investor unlock schedules, which cannot be forsaken by a company. In contrast, non-obligatory vesting is akin to a founder's vesting of shares, which should be canceled if the founder is ever terminated or resigns.

Admins are whitelisted by the board of directors, such that they can cancel non-obligatory vesting schedules. Admins can be added or removed at any time. They do not need to be in the given organization. However, it is highly suggested that they are. An admin can be a person, department, or other address.

When vesting is canceled by the board of directors or an admin department, the NFT is burned. Any unvested shares will be burned if the vesting is not related to the company's payroll. If the vesting is related to the company's payroll, any unvested shares will be transferred to the company's treasury upon cancellation.

When vesting, four variables must be determined:

  1. The share class

  2. The vesting amount

  3. The vesting duration

  4. The vesting cliff

  5. The initial unlock amount

The vesting cliff and initial unlock are immutable, meaning they cannot be altered once the vesting NFT is minted. However, both the vesting amount and duration can be extended by the token owner.

Vesting cliffs act similar to those found in traditional finance. It is an amount of time that must pass before any shares are vested. Once passed, the initial unlock amount becomes vested and claimable, and the remaining shares, excluding the unlock amount, are vested linearly.

Vesting for an employee is unable to be canceled by admins. Rather, the employee must resign or be terminated for their vesting to end. Conversely, any unlock schedules stemming from a priced round are solely cancellable by only the investor, themself.

While Mezzanine's vesting is typically used by other smart contracts, it can also be utilized by individuals who desire to voluntarily vest their shares. This is typically seen in early-stage startups that are actively raising venture capital funding. Some venture capital funds require that the founder(s) shares be vested over time to gain confidence in the founder(s)'s commitment.

Vesting does not occur over periods but, rather, happens continuously. This differs from typical vesting, which frequently takes place over quarters. In Mezzanine, vesting occurs on a second-by-second basis. An employee or investor can claim their vested shares at whatever frequency they desire.

The voting power of vesting shares is maintained and can be delegated to another account. However, voting with vesting shares by employees is disabled. For example, if Alice has 1,000 vesting shares as part of her employment contract, she cannot vote with those shares in governance until her shares are vested.

Last updated