Month 5: insiders hold 0.0% of circulating supply. Month 6: insiders hold 57.7%. One month. One cliff. The entire power balance of a token shifts overnight.
This is what a cliff-drop looks like in practice. We modeled two scenarios in the Build My Tokenomics designer — identical allocations, identical supply, but one critical difference in vesting structure. The modeled results show how a single design decision turns a controlled unlock into a supply shock.
The Setup: 30% Team, 8% Advisors, 6-Month Cliff
Both scenarios use the same allocation: 30% to team, 8% to advisors, with the remaining supply distributed across community, ecosystem, treasury, and liquidity categories. Total insider allocation is 38% of the 1 billion token supply.
Both scenarios apply a 6-month cliff period to team and advisor tokens. No insider tokens unlock before month 6. The difference is what happens after the cliff.
Scenario A: No vesting. When the cliff expires at month 6, 100% of team and advisor tokens unlock immediately.
Scenario B: 24-month linear vesting after the cliff. When the cliff expires at month 6, tokens begin releasing in monthly increments over the following 24 months.
Same allocations. Same cliff. Radically different outcomes.
Scenario A: The Cliff-Drop
Here is what the designer shows for the no-vesting configuration, tracking insider share of circulating supply and total circulating percentage month by month:
| Month | Insider % of Circulating | Community % of Circulating | Total Circulating % |
|---|---|---|---|
| 0 | 0.0% | 100.0% | 19.8% |
| 5 | 0.0% | 100.0% | 25.5% |
| 6 | 57.7% | 42.3% | 65.8% |
| 7 | 56.7% | 43.3% | 67.0% |
| 12 | 50.6% | 49.4% | 75.1% |
Look at the jump from month 5 to month 6. Circulating supply leaps from 25.5% to 65.8% — a 40.3 percentage point increase in a single month. Insider share of circulating tokens goes from 0.0% to 57.7%. Community holders who owned 100% of circulating supply suddenly own 42.3%.
The model flags two cliff-drop events at month 6: Team at 30.0% of total supply and Advisors at 8.0% of total supply. Both carry the cliff-drop warning because both unlock their entire allocation in a single event.
At month 0, the circulating supply of 19.8% comes from Liquidity at 15.0% (itself a cliff-drop event, since the full liquidity allocation unlocks at TGE) and Community at 4.8%.
By month 12, insider share has declined to 50.6% as community unlocks continue — but insiders still control more than half of all circulating tokens, six months after the cliff event.
Scenario B: The Same Tokens, Spread Over Time
Now the same 38% insider allocation with 24-month vesting after the 6-month cliff:
| Month | Insider % of Circulating | Total Circulating % |
|---|---|---|
| 0 | 0.0% | 19.8% |
| 5 | 0.0% | 25.5% |
| 6 | 0.0% | 27.9% |
| 7 | 5.5% | 30.7% |
| 12 | 21.5% | 47.3% |
| 24 | 35.4% | 86.3% |
Month 6 tells a completely different story. Circulating supply moves from 25.5% to 27.9% — a modest 2.4 percentage point increase instead of 40.3. Insider share remains at 0.0% at month 6 because the vesting has only just begun; the first meaningful insider tokens arrive at month 7 at 5.5%.
The model identifies only 1 cliff-drop event in this scenario: the Liquidity allocation at TGE. No insider cliff-drops exist because the vesting schedule prevents any single large unlock.
By month 12, insiders hold 21.5% of circulating supply — compared to 50.6% in Scenario A. By month 24, insiders reach 35.4% as vesting completes. The same 38% of supply reaches the market, but over 24 months instead of one.
Why the Market Reacts to Cliff-Drops
A token unlock calendar is public information. Every serious market participant tracks upcoming unlocks for tokens they hold or are evaluating. When a large cliff-drop approaches, the market does not wait for the actual unlock to react.
In the weeks before a known cliff event, holders begin pricing in the expected supply increase. Some sell in anticipation. Liquidity providers may widen spreads. The actual unlock day often sees less dramatic movement than the preceding weeks — because the damage is already done.
The Scenario A cliff-drop is especially severe because of the insider vs community ratio shift. Before month 6, every circulating token belongs to community participants — public sale buyers, liquidity providers, airdrop recipients. These holders made an active choice to acquire the token. After month 6, the majority of circulating tokens belong to insiders who received their allocation through agreements, not market participation.
This is not a moral judgment. Teams and advisors earn their tokens through work. But the market treats insider tokens differently from community tokens because the cost basis and motivation to hold differ. An advisor who received tokens at a fraction of the market price has a different sell calculus than a buyer who purchased at the current price.
The Vesting Gradient
Scenario B does not eliminate insider supply — it transforms a step function into a gradient. The same 380 million tokens (38% of 1 billion) reach the market eventually. The difference is the rate.
In Scenario A, the rate is infinite for one month: 380 million tokens in a single unlock. In Scenario B, the rate is approximately 15.8 million tokens per month over 24 months. The market can absorb 15.8 million tokens per month far more easily than 380 million in a single event.
This is why vesting exists. Not to prevent insiders from receiving their tokens, but to match the rate of new supply to the market’s capacity to absorb it.
Design Implications
The modeled results from these two scenarios point to concrete design principles:
Cliff without vesting is a common risk indicator. The only scenario where a cliff-only unlock makes sense is when the allocation is small enough that the supply impact is negligible. At 38% of supply, it is not negligible — it is dominant.
Longer vesting smooths the curve but extends the overhang. Scenario B’s 24-month vesting means the market carries insider unlock overhang until month 30 (6-month cliff + 24-month vesting). A 12-month vesting would reduce overhang but increase monthly supply pressure. The trade-off is between duration and intensity.
Multiple cliff-drops compound the effect. Scenario A has 3 total cliff-drop events (Liquidity at TGE, Team at month 6, Advisors at month 6). Scenario B has only 1 (Liquidity at TGE). Fewer cliff-drops mean fewer moments where the market faces sudden supply expansion.
The insider control threshold matters. At 57.7% insider control of circulating supply, governance votes, liquidity pool dynamics, and price action are all disproportionately influenced by a small group. The Venture-Backed scenario in the designer shows how different vesting configurations affect this ratio over time.
Testing Your Own Cliff Scenarios
The scenarios above use specific numbers to illustrate the principle, but every project has different allocations, cliff durations, and vesting periods. The Build My Tokenomics designer lets you configure any combination and immediately see the unlock schedule, cliff-drop warnings, insider vs community ratio, and circulating supply curve.
Before finalizing any tokenomics design, model the cliff events. Look at what happens in the month each cliff expires. If insider share of circulating supply jumps by more than 20 percentage points in a single month, that is a signal to add or extend vesting.
The numbers do not lie, but they do require you to look at them before someone else does.
Methodology
Both scenarios were modeled in the Build My Tokenomics designer using a 1 billion token supply. Scenario A applies a 6-month cliff with no vesting to Team (30%) and Advisors (8%) allocations. Scenario B applies the same 6-month cliff followed by 24-month linear vesting to the same allocations. All other allocations (community, ecosystem, treasury, liquidity) use identical configurations across both scenarios. Insider percentage of circulating supply is calculated as (cumulative insider unlocked tokens) / (total circulating supply at that month). Cliff-drop events are flagged when an unlock releases more than 5% of total supply in a single event without preceding vesting. No price modeling, market data, or external assumptions were used. All figures are direct outputs from the tool’s simulation engine.
For educational and illustrative purposes only. Not financial, investment, or legal advice.
All numbers in this article were generated by running Build My Tokenomics' tokenomics engine with the specified parameters. No data was fabricated or estimated. This content is for educational purposes only and does not constitute financial advice.
For educational purposes only. Not financial, investment, or legal advice. See Terms of Service.