Manage token vesting without smart contracts using Liquifi and Safe multi-sig wallets

Manage token vesting without smart contracts using Liquifi and Safe multi-sig wallets

Historically, smart contracts have been the preferred solution to manage token vesting

Typically, managing token vesting requires writing and using smart contracts where you deposit and stream tokens at a specified rate to the beneficiary. Providers that offer ready-to-use smart contracts (such as Liquifi) for token vesting are only sometimes compatible with internal security or compliance requirements.

While using smart contracts for token vesting and lockups has many benefits, some investors and projects prefer not to use them for the following reasons.

• Minimizing the risk of smart contract exploits
• Needing a qualified custodian to manage assets
• Reduce usability friction when working with smart contracts, signing transactions, and paying gas fees
  

Liquifi enables direct integration with Safe multi-sig wallets (f.k.a. Gnosis Safe) as an alternative option for token vesting, with or without smart contracts. 

Your custody, compliance, and security needs evolve as your project grows

Founders or smaller teams typically start with a self-custody solution like Ledger or Metamask. These tools are free, easy to use, and flexible. 

As your team grows and multiple people assume responsibility for token management, you require a solution that enhances security, permissions, and risk mitigation. As the longest-standing free solution with no exploits and significant total value secured, Safe multi-sig wallets are a popular choice for early-stage teams.

Compliance requirements only increase as a project grows, depending on factors like location, investor base, and token status (i.e., whether you are based in a regulated jurisdiction, have raised funds from accredited investors, and have launched a token and managed an active treasury).

Crypto companies must be careful when navigating custody and token transfers. Non-tailored solutions can pose significant risks, such as incompatibility with your legal strategy and regulatory penalties.

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Whether to use smart contracts for token vesting or not

The benefits of using a smart contract: 

1. Automation of token transfers 
2. Transparency for your stakeholders
3. Stakeholders can claim tokens on their own
4. More difficult for bad actors to adjust token grant details (because the logic is stored on-chain and modifications require a valid signature)
   

The drawbacks of using a smart contract: 

1. Having to deposit tokens into a smart contract upfront (note: Liquifi does not require you to deposit tokens upfront)
2. Smart contract exploitation risk
3. Transaction signing friction, particularly for multi-sig wallets, when needing to adjust token grant details
4. Inconvenient user experience for those who aren’t crypto-native to understand how wallets and smart contracts work together 

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How does token vesting work with Liquifi’s smart contract?

With Liquifi smart contracts, you get the best of both worlds:

• You don’t have to deposit all tokens upfront
• You can switch wallet addresses of who owns the vesting contract
• Liquifi never custody, nor has access to, your private keys

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How does token vesting work without a smart contract through Liquifi?

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The following example shows a direct flow of tokens from a Safe multi-sig wallet to your stakeholders’ wallets, bypassing the need for smart contract interaction. Vesting and lockup logic for both employees and investors is stored in the Liquifi app. As a result, we deliver the following benefits: 

• Minimize smart contract exploit risks
• Save on token transfer gas fees with bulk transaction processing
• Increase ease of use and flexibility to customize and adjust token grant details
• Control and flexibility to comply with legal restrictions on avoiding smart contracts and custody rules for token management

Token vesting is typically managed using smart contracts, which can be complex and require specialized expertise. 

Liquifi offers a ready-to-use solution that integrates with Safe multi-sig wallets, providing a more flexible and secure way to manage token vesting, with or without smart contracts.

If you want a tailored solution for compliant token distributions, Liquifi is ready to help. Download our one-pager for a sneak peek or contact bd@liquifi.finance to discuss your use case.