Navigating Token Compensation & Equity

What "tokens as compensation" really means

Most Web3 offers include some mix of:

• Cash base salary — paid monthly, usually in USD, EUR or USDC.
• Token grant — a number of the project's native token, vesting over time.
• Equity — only for companies (not pure DAOs/protocols), similar to a startup.

The token grant is where most candidates lose money by not asking the right questions.

Key terms, explained simply

Cliff

The minimum time you must stay before any tokens vest. Industry standard: 1 year. If you leave before the cliff, you get zero tokens.

Vesting schedule

How the remaining tokens unlock after the cliff. Standard:

• 4-year vest, 1-year cliff, monthly thereafter.
• Example: 48,000 tokens total. After 12 months → 12,000 unlock at once. Then 1,000/month for 36 months.

TGE (Token Generation Event)

The moment the token actually exists / is launched. Before TGE, your grant is a promise — not yet tokens.

Liquid vs. non-liquid

• Liquid: the token trades on exchanges. You can sell vested tokens immediately.
• Non-liquid: the token does not yet exist or has no real market. Value on paper, zero in your wallet until TGE + listing.

Lock-up

Even after vesting, some grants are locked from selling for an additional period (often 6–12 months post-TGE) to protect price.

How to value a token offer

Use this rough formula:

Expected value = tokens granted × current/expected price × probability of vesting × liquidity discount

Sensible discounts:

• Pre-TGE startup: multiply nominal value by 0.2 – 0.4.
• Post-TGE, top-50 token: multiply by 0.7 – 0.9.
• Post-TGE, thin liquidity: multiply by 0.3 – 0.5.

Then divide by 4 years to compare against a base salary uplift.

Questions to ask before signing

1. What is the total token supply and what % does my grant represent?
2. What is the vesting schedule and cliff exactly?
3. Is there a post-TGE lock-up?
4. What happens to unvested tokens if I leave (good leaver vs. bad leaver)?
5. Is the grant denominated in tokens or in USD? (USD-denominated grants are recalculated at TGE — usually worse for you.)
6. Has the team raised, and at what valuation? Token price is often anchored to last round.
7. Are early employees subject to the same vesting as investors, or worse?

Red flags

• "We will figure out the token grant later."
• Cliff longer than 1 year.
• Total vesting longer than 4 years.
• No written agreement, only Notion or Telegram messages.
• Founders' allocation has a shorter vesting than the team's.

Practical advice

• Always get the grant in a signed document.
• Treat tokens as bonus, not salary. Negotiate a cash base you can actually live on.
• If you receive liquid tokens monthly, set a rule: sell a fixed % every month into stables. Do not try to time the market.
• Consult a tax advisor before TGE — token taxation varies wildly per country.