# How is a sale of locked or vesting tokens priced and settled OTC?
Locked tokens sell OTC at a discount set by time to unlock and the buyer's required return, and settle up front, at each unlock or in stages.
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A sale of locked or vesting tokens is priced as a discount to the liquid market price, sized by how long the buyer waits for each unlock and by the annual return the buyer requires for waiting, and it is settled either with payment up front against delivery at each unlock, with payment at each delivery, or with a staged mix of the two, usually backed by collateral or a neutral third party. The price is one negotiation and the settlement structure is another, and each moves the other: the party who carries more risk between signing and the last unlock is paid for it in the price.
Neither side can look the price up. A liquid token has an order book; a locked allocation has a schedule, a contract that may or may not allow a transfer, and two parties with different views of what waiting is worth. What follows gives you a method you can reproduce on a spreadsheet, a worked position with a cliff and linear vesting, the settlement structures on the same criteria, and the points the written agreement has to fix. Every number in it is illustrative: none is a market statistic, and the required returns used are assumptions chosen to show the arithmetic.
15.4 monthsweighted-average time to unlock of the worked position, against a last unlock at month 30
35%illustrative discount on that position at a 40% required annual return
$1,560,000total consideration for 1,200,000 tokens quoted at $2.00 liquid
Worked example detailed below: a cliff in 6 months releasing 25%, then 24 equal monthly unlocks. Illustrative figures, not market data.
## What do "locked" and "vesting" mean in a token agreement?
A locked token is one its holder owns or is owed but cannot yet transfer, and a vesting token is one the holder earns or receives progressively over a schedule. The two words are often used for the same position, but they are not the same thing, and the difference changes what a seller actually has to sell.
A **lock-up** is a restriction on transfer. The tokens belong to the holder, or will be delivered to the holder, and a contract or a smart contract prevents them from moving before a date. An investor who bought in a private round typically holds a lock-up: the right to the tokens is already acquired, only the delivery or the transferability waits.
**Vesting** is a condition on entitlement. Team members and advisors typically vest: the tokens are earned with time or service, and the part that has not vested may be forfeited if the person leaves or the grant is cancelled. An unvested token is therefore weaker than a locked one, because the seller may never receive it at all.
Three terms describe the schedule in either case:
- **Cliff**: a first period during which nothing is released, followed by a single release on the cliff date. A twelve-month cliff releasing 25% means nothing for twelve months, then a quarter of the position at once.
- **Linear vesting or linear release**: the remainder is released in equal instalments, by month, by day or by block, until the end date.
- **Lock-up end or unlock date**: the date from which a given tranche can be transferred freely.
Before anything is priced, the buyer needs to know which of the two the position is, where the restriction lives (in the purchase agreement, in a grant document, in a vesting smart contract, or in an exchange or custodian account), and whether any event can take the tokens back from the seller. A position that can be forfeited is priced for that possibility as well as for the wait.
## What forms can a sale of locked tokens take?
A sale of locked tokens takes one of three forms: a transfer of the underlying agreement or of the claim to the tokens, a forward sale under which the seller keeps the position and delivers tokens as they unlock, or a sale of a wrapped or tokenised version of the position. Which form is available is decided first by the seller's own contract and only then by the two parties' preferences.
| Form | What the buyer ends up holding | Issuer's involvement | Main exposure for the buyer |
| --- | --- | --- | --- |
| Transfer of the agreement or claim | The seller's place in the original agreement, or the right to receive the tokens from the issuer | Usually written consent, and often onboarding of the buyer | Consent refused or delayed; the buyer inherits the original terms as they stand |
| Forward sale delivered at unlock | A contractual promise from the seller to deliver tokens as each tranche unlocks | None in the mechanics, but the seller's agreement may still restrict it | The seller itself: default, insolvency, or forfeiture of unvested tokens |
| Sale of a wrapped or tokenised position | A token or instrument that represents the locked position and can itself change hands | Depends on whether the vesting contract or issuer supports the wrapper | The wrapper's contract and the legal standing of what it represents |
A transfer puts the buyer in direct relationship with the issuer, which removes the seller from the chain once it completes. That is its strength, and the reason it needs the issuer: the project must recognise the new holder, redirect the delivery address and usually run its own identity checks on the buyer.
A forward sale leaves the original relationship untouched. The seller remains the holder of record, receives each tranche, and passes it on. The buyer's counterparty is the seller for the whole life of the schedule, which can be several years.
A wrapped position exists where the vesting contract issues a transferable receipt for the locked balance, or where a platform holds the claim and issues a token against it. The buyer then holds something that moves like a token, but its value still rests on the schedule underneath and on the legal and technical soundness of the wrapper.
## Can a holder sell locked tokens without the issuer's consent?
Often not: many token purchase agreements and grant documents restrict or forbid transfer, and a sale usually needs the issuer's prior written consent or has to be structured so that it does not breach the restriction. Checking this comes before price, because a sale made in breach can leave the seller in default towards the project and the buyer holding a claim the issuer does not recognise.
A published analysis by the law firm Pillsbury of secondary sales of agreements for future tokens notes that most such agreements bar transfers to third parties without the issuer's approval, with wording that generally prohibits assignment of the agreement or of rights under it without the issuer's prior written consent. The same analysis observes that issuers may refuse, among other reasons to avoid appearing to encourage a secondary market or to limit the cost of policing transfers, and that some restrictions allow transfers only to affiliates.
Where a direct transfer is closed, the forward structure is the usual alternative, and the same analysis describes it as a physically settled, prepaid forward: the buyer pays, the seller delivers the tokens when they are issued. Whether that works depends on how far the restriction reaches. A clause that covers only assignment of the agreement leaves more room than one that also covers the underlying tokens, indirect transfers, or the transfer of economic rights. Team grants and advisor agreements are frequently the tightest, and some forbid any hedge or forward on unvested tokens.
## Why do locked tokens trade at a discount to the liquid price?
Locked tokens trade at a discount because the buyer pays today for something that cannot be sold until later, and carries, without being able to exit, every risk that can materialise in between. The discount is the price of that wait, and it has five drivers that can each be discussed separately in a negotiation.
**Time to unlock.** The longer the wait, the larger the discount, and the relationship compounds: two years is not twice one year. What matters is not the last date on the schedule but the average wait across all tranches, weighted by size.
**Volatility.** A holder of liquid tokens can sell when the price falls; a holder of locked tokens watches. Valuation practice for restricted shares has long modelled this as the cost of an option the holder lacks. According to a review of these approaches by the valuation firm Stout, the model published by David Chaffe in 1993 treats the discount as the price of a European put option, Francis Longstaff's model uses a lookback put that assumes perfect market timing and so gives an upper bound, and John Finnerty's 2012 model uses an average-strike put; in the Finnerty model the discount rises with both volatility and the length of the restriction. Tokens are commonly far more volatile than listed shares, which is one reason discounts quoted on locked allocations can look large to someone used to equity.
**Liquidity at unlock.** The liquid price used as the reference is the price of a small trade today. A large position unlocking alongside every other early holder's tranche may not sell at that price. A buyer who expects to sell into thin depth prices the slippage in.
**Counterparty and delivery risk.** In a forward sale, the buyer depends on the seller to still exist, to still hold the position and to perform at each unlock. The risk also covers the project: a schedule extended by governance, a token migration, a slashing event on staked locked tokens, or a delivery that the issuer delays.
**Cost of capital.** Money paid up front is tied up until the tokens arrive. A fund with a hurdle rate, or a desk financing the purchase, needs at least that return before any compensation for risk.
In practice the buyer folds all five into one number: the annual return required on the money for the period it is locked. That is the basis of the method below.
## How do you calculate an illustrative discount for a locked token position?
An illustrative discount is the liquid price reduced by the buyer's required annual return, compounded over the weighted-average time to unlock: the discounted price equals the liquid price divided by one plus the required return, raised to the power of the number of years to unlock, and the discount is one minus that ratio. With a 40% required return and one year to unlock, the price is the liquid price divided by 1.40, which is 71.4% of it, a discount of 28.6%.
The method takes three inputs:
- the liquid reference price, taken on agreed venues over an agreed window rather than at a single moment;
- the schedule, reduced to a weighted-average time to unlock: each tranche's months to unlock multiplied by its share of the position, then summed and divided by twelve;
- the required annual return, which is the negotiated variable and carries all the risk drivers.
The table gives the discount this formula produces for a single unlock date. The three required returns are assumptions for illustration; a real buyer's number reflects the token's volatility, the seller's standing and the settlement structure.
| Time to unlock | 20% required return | 40% required return | 60% required return |
| --- | --- | --- | --- |
| 3 months | 4.5% | 8.1% | 11.1% |
| 6 months | 8.7% | 15.5% | 20.9% |
| 12 months | 16.7% | 28.6% | 37.5% |
| 18 months | 23.9% | 39.6% | 50.6% |
| 24 months | 30.6% | 49.0% | 60.9% |
| 36 months | 42.1% | 63.6% | 75.6% |
| 48 months | 51.8% | 74.0% | 84.7% |
Two things are visible in the table. The discount grows more slowly than time: at a 40% required return, going from 12 to 24 months adds 20.4 points, and going from 24 to 36 months adds 14.6. And the required return matters more than a few months either way: at 24 months, the gap between a buyer asking 20% and one asking 60% is 30.3 points of the liquid price.
The method has stated limits. It assumes the liquid price today is the best estimate of the price at unlock, it treats risk as a single rate rather than modelling volatility directly, and it says nothing about depth on the day of unlock. It is a common language for a negotiation, not a valuation opinion. A buyer who wants to price volatility explicitly can run one of the option-based models next to it and compare.
## What does the pricing look like for a position with a cliff and linear vesting?
For a position with a cliff and linear vesting, the price comes from reducing the schedule to one weighted-average time to unlock, applying the required return to that time, and multiplying the resulting price per token by the quantity. The worked example uses a seller holding 1,200,000 tokens with a liquid reference price of $2.00, so a liquid value of $2,400,000. The cliff falls 6 months after the sale date and releases 25% of the position; the remaining 75% is released in 24 equal monthly tranches, from month 7 to month 30. The buyer requires 40% a year and pays the whole consideration at signing.
Pricing a cliff-and-linear positionWorked example: 1,200,000 tokens, $2.00 liquid price, 40% required annual return. Illustrative.
List the tranchesThe cliff releases 300,000 tokens at month 6. The linear part releases 900,000 tokens as 24 tranches of 37,500, one a month from month 7 to month 30.
Average the linear partEqual tranches from month 7 to month 30 unlock on average at the midpoint of the first and last: (7 + 30) / 2 = 18.5 months.
Weight by size25% of the position at 6 months plus 75% at 18.5 months: 0.25 × 6 + 0.75 × 18.5 = 1.5 + 13.875 = 15.375 months, or 1.28 years.
Apply the required return1.40 raised to the power 1.28125 is 1.539. One divided by 1.539 is 0.650: the price is 65.0% of liquid, a discount of 35.0%.
Set the price per token$2.00 × 0.650 = $1.2996, agreed at $1.30.
Compute the consideration1,200,000 × $1.30 = $1,560,000, against a liquid value of $2,400,000.
The weighted-average time is a shortcut, and a seller should know which way it leans. Because the discount grows more slowly than time, pricing every tranche at its own date and adding the results always gives a slightly higher value than pricing the whole position at its average date. Done tranche by tranche at the same 40%, this position is worth $1,598,889, or $1.3324 per token, a discount of 33.4%. The shortcut therefore costs the seller $38,889 against the agreed $1,560,000. On a short, even schedule the gap is negligible; on a long one with a late tail it is worth a line in the spreadsheet.
The tranche view also shows how unevenly the schedule is valued. At a 40% required return the cliff tranche is priced at $1.69 per token, a 15.5% discount, while the last monthly tranche, 30 months out, is priced at $0.86, a 56.9% discount. A seller who needs only part of the money can sell the far tranches, where the buyer's patience is worth most to them, or keep them and sell the near ones at a much smaller discount. The same $1.30 average hides both choices.
Moving the required return moves everything. On the same position and the same shortcut, a buyer asking 20% pays $1.58 per token, or $1,896,000; a buyer asking 60% pays $1.10, or $1,320,000. The $576,000 between those two totals is the real subject of the negotiation, and it is settled by argument about the risk drivers, not by the formula.
## What return does the buyer end up with if the token price moves?
The buyer earns the required return only if the token sells at each unlock for the liquid price used in the pricing; the discount is also the fall in price the buyer can absorb before losing money. In the worked example the buyer paid $1.30 for a token quoted at $2.00, so the position breaks even, before costs, if the buyer sells every tranche at an average of $1.30, which is 35% below the reference.
The chart assumes the buyer sells each tranche on its unlock date at one constant price, expressed against the $2.00 reference, and compares the total proceeds with the $1,560,000 paid.
What the buyer gets back for $1,560,000 paidTotal sale proceeds on 1,200,000 tokens, by price at unlock relative to the $2.00 reference. Illustrative.
Before trading costs, slippage and tax. Assumes full delivery of every tranche and a sale on each unlock date.
Translated into an annual return on the money, taking the timing of each tranche into account, the same four cases give about −18% a year with the price halved, about 12% with the price a quarter lower, about 43% with the price unchanged and about 110% with the price half as high again. The unchanged case lands above the 40% asked because the shortcut priced the position slightly below its tranche-by-tranche value.
The spread of those outcomes is the argument for the discount. A buyer who is right about the token keeps a large gain; a buyer who is wrong has a cushion of 35% and no exit. The seller has exchanged all of that for $1,560,000 that no longer depends on the token. Seen this way, a locked-token sale is less a cheap purchase than a transfer of risk at an agreed price, and both sides negotiate better when they describe it that way.
## How is the sale settled, and who carries the risk at each stage?
A locked-token sale is settled in one of four ways: full payment at signing against delivery at each unlock, payment at each delivery, staged payments that mix the two, or either of those with collateral or a neutral third party holding assets. The choice decides who is exposed to whom, for how long, and it belongs in the price.
| Structure | Who is exposed | What it does to the price | Typical safeguard |
| --- | --- | --- | --- |
| Full payment at signing, delivery at each unlock | The buyer, to the seller, until the last tranche | Largest discount: the buyer funds the whole wait and carries delivery risk | Collateral from the seller, a pledge or control over the receiving wallet, default remedies |
| Payment at each delivery, at the fixed price | The seller, to a buyer who may walk away if the price falls | Smaller discount, since no capital is advanced | A deposit or margin posted by the buyer, topped up if the price moves |
| Staged: part at signing, the rest at each delivery | Both, each for a part | In between; the up-front part is discounted, the rest less so | The up-front part sized to the buyer's loss if the seller fails, and the reverse |
| Assets held by a neutral third party | Neither directly; both rely on the third party and its instructions | Adds a cost; can narrow the discount by removing delivery risk | An escrow agent, custodian or smart contract releasing against agreed conditions |
Full payment at signing is what the pricing method above assumes, and it is what a seller who wants liquidity is asking for. Its weakness is the length of the buyer's exposure. In the worked example the buyer has paid $1,560,000 and receives nothing for six months, then tokens month by month for two more years. The safeguards are those of any long-dated obligation: representations about the position, a covenant not to sell or pledge it elsewhere, collateral where the seller has some, and where the vesting contract allows it, delivery directly to an address the buyer or a custodian controls.
Payment at each delivery turns the trade into a series of small exchanges: in the example, $390,000 against 300,000 tokens at the cliff, then $48,750 against 37,500 tokens each month. The seller gets no liquidity today, which often defeats the purpose, and carries the mirror risk: if the token trades well below $1.30 at an unlock, the buyer has every reason not to pay. A deposit from the buyer answers that.
Staged payment splits the difference. Suppose the parties keep the $1,560,000 total and agree that 30% is paid at signing: the buyer pays $468,000 up front and the remaining $1,092,000 as $0.91 per token on delivery, so $273,000 at the cliff and $34,125 with each monthly tranche. The buyer's maximum loss if the seller disappears before the cliff falls from $1,560,000 to $468,000. In a real negotiation the total would not stay the same, because the buyer advances less capital for less time, and the price per token should move up towards the liquid price for the part paid on delivery.
A neutral third party can hold the up-front payment and release it tranche by tranche, hold the seller's collateral, or receive the unlocked tokens and pass them on. An escrow agent or custodian brings procedures, identity checks and a party to turn to when instructions conflict; a smart contract brings automatic release against conditions that can be verified onchain. Neither removes the need for the agreement to say precisely what triggers each release.
Many of these sales involve more than two parties: a broker who found the buyer, an introducer, sometimes a co-seller from the same round. Where the payment itself is the point of friction, a payment router addresses that part. Shaka routes the total amount of a deal and pays every party their share in one transaction: the shares are agreed, and can be signed by each recipient, before the buyer pays, the buyer pays once, every party is paid at the same moment, and the payment is final. It routes and never holds the funds, so it is not an escrow and does nothing about the delivery of future tranches, which remains a matter for the structures in the table.
## What must the written agreement fix?
The written agreement must fix the quantity, the schedule, the price and the consequences of every event that can change what is delivered or when: a token migration, a change to the schedule, slashing, forfeiture and a failed delivery. A locked-token sale runs for months or years, and what the parties leave unsaid at signing is decided later by whoever holds the assets at that moment.
- **Quantity and identity of the position.** The number of tokens, the agreement or grant they come from, the vesting contract or account that holds them, and the seller's statement that the position is unencumbered and has not been sold or pledged elsewhere.
- **Schedule.** Every unlock date and amount, set out as a table, and the source that prevails if the project's published schedule and the contract differ.
- **Price and reference.** The price per token and the total, the currency or stablecoin of payment, and whether the price is fixed at signing or set by a formula at each delivery. A formula needs its venues, window and fallback.
- **Delivery mechanics.** The address tokens are delivered to, how many days after each unlock the seller has to deliver, and what counts as delivery.
- **Token migration or redenomination.** If the project swaps the token for a new one, splits it or changes chain, the agreement says the buyer receives the successor asset at the conversion ratio applied to all holders, and who performs the migration steps.
- **Changes to the schedule.** If governance or the issuer extends the lock, the agreement says whether the buyer simply waits, whether the price is adjusted for the extra time, or whether the buyer may unwind the undelivered part.
- **Slashing, staking rewards and distributions.** If the locked tokens are staked, who bears a slashing loss and who receives rewards, airdrops and other distributions accruing before delivery.
- **Forfeiture.** For vesting positions, what the seller owes if unvested tokens are lost because the seller leaves the project or the grant is cancelled.
- **Failed delivery.** The cure period, then the remedy: return of the price paid for the undelivered tranches with an agreed rate of interest, a cash amount based on the market price on the missed date, a call on collateral, or a combination. The clause states how the market price is measured.
- **Consent and conditions.** Whether the issuer's consent is required, who obtains it, and that the deal falls away without cost if it is refused.
- **Confidentiality, governing law and disputes.** Which law applies, where a dispute is heard, and what either side may disclose about the trade.
The failed-delivery clause deserves the most attention, because its remedy fixes who benefits from a default. If the only remedy is the return of the price paid, a seller whose token has tripled has a reason to default and refund. A remedy tied to the market price on the missed date removes that reason.
## What do tax and securities law change?
Tax and securities law can change whether the sale is permitted, who may buy, and when the seller is taxed, and the answers differ from one country to the next. Nothing here is legal or tax advice; the points below are the questions to put to an adviser before signing, not answers to them.
**Whether the token or the agreement is a security.** Where the position is treated as a security, a resale is itself regulated. In the United States, for example, the Securities and Exchange Commission's Rule 144 allows public resale of restricted securities only after a holding period, which the Commission states as six months where the issuer is a reporting company and twelve months where it is not, alongside other conditions. The Pillsbury analysis cited earlier adds that a private resale needs its own exemption and that participants in a forward on such an instrument may face further obligations. Other jurisdictions apply their own tests and their own regimes for crypto-assets.
**Whether the forward is a derivative.** A promise to deliver an asset in the future at a price fixed today can fall under derivatives rules in some countries, depending on the asset, the parties and whether settlement is physical.
**Who the buyer is.** Many regimes limit such sales to professional or accredited investors, and both parties are expected to identify each other and the origin of the funds and tokens.
**When the seller is taxed.** A prepaid forward raises the question of whether the taxable sale happens at signing, when the money arrives, or at each delivery. Tax authorities do not all answer alike, and the treatment of team tokens received for services differs again from that of tokens bought in a round.
**What the seller owes its own project.** A sale that breaches an employment, advisory or investment agreement has consequences that no securities exemption cures.
A sale of locked tokens that holds up is one where the price can be reconstructed from its inputs, the settlement structure matches who was paid to carry the risk, the contract says what happens when the token or the schedule changes, and each party has had its own adviser confirm that the sale may be made at all.