The drama of "clearing incentives" before TGE is playing out again: How should Web3 practitioners protect their own tokens?

Original Authors: Huang Wenjing, Chen Haoyang

Everything Happens on the Eve of TGE

In the world of Web3, the most dramatic moments often occur in the weeks leading up to a project’s TGE (Token Generation Event).

Mankun has recently received numerous inquiries from employees of crypto projects: complaints about project teams reclaiming token options at TGE, dismissing core team members, and so on, such phenomena are not uncommon:

• Developers working tirelessly for months, about to launch their tokens, suddenly lose all incentives due to “organizational adjustments”;
• Early advisors promised “token rewards and co-investment shares,” but as the project’s popularity soared, they were told “model not finalized,” “awaiting compliance approval,” and delays ensued;
• Others see the clear “team incentive pool 10%” stated in the whitepaper, only to end up with nothing at the vesting date due to “performance not met” or “triggering non-compete clauses.”

These stories sound like rumors, but they happen in almost every bull market.

And in these incidents, the passive party is often not the investors, but the incentivized participants—those who truly make the project happen.

Token Rights Incentives ≠ Equity Incentives: The Fundamental Difference in Contract Logic

Many people, when first encountering token incentives, tend to compare them simply to “Web3-style equity incentives.”

But in fact, there are essential differences in rights nature, legal regulation, and contract design between the two.

In equity incentive contracts, the subject is shares of the company, which fall under corporate law regulation.

Share transfers are often restricted by pre-emptive rights, so companies usually need to explicitly state in incentive agreements:

“This incentive grant will not be affected by pre-emptive rights restrictions, and will not impact the rights of the incentive recipient.”

In contrast, in token incentive contracts, the subject is cryptocurrency, which does not involve shareholder rights, nor does it require registration or transfer procedures with authorities.

However, it faces another set of risks: financial regulation and compliance issuance issues.

Therefore, token incentive contracts need to clearly specify:

• “The company guarantees that the token has been legally issued and does not belong to prohibited financial products in the relevant jurisdiction; if regulatory policies change and the token cannot be distributed, the company shall provide equivalent compensation or alternative solutions.”*

Additionally, token incentive contracts should explicitly clarify:

• Whether the incentivized tokens have trading attributes;
• Whether they might be considered securities (Security Token);
• Whether the project has the qualification to issue tokens and a legitimate TGE pathway.

In simple terms:

• Equity incentive contracts focus on internal rights constraints and transfers within the company;
• Token rights incentive contracts focus on external compliance, regulatory risks, and enforceability.
• Although both are “incentive tools,” the logic of a good contract is entirely different.

To Secure Your Own Tokens, First Put the Promises on Paper

To truly protect your rights, the first step is to ensure the project team commits in writing. The following are essential “must-have” actions:

• Sign a written 《Token Incentive Agreement》 (Token Grant / Option / RTU / Warrant, etc.)

Including details such as token amount, vesting schedule, cliff period, lock-up period, and unlocking method. Without written documentation, all promises are just “airdrop oral sugar.”

• Specify termination and acceleration (acceleration) conditions

Clearly state: if circumstances like “for-cause dismissal” or “change of control” occur, whether you can retain vested tokens, and whether acceleration is triggered. This determines whether you can still receive tokens if dismissed before TGE.

• Confirm delivery mechanisms

Including token issuance timing, delivery method, on-chain wallet address, and whether tokens are held in smart contracts or released via third-party escrow. Avoid situations where “the project launches, but no tokens are sent.”

• Address compliance and tax issues

Different jurisdictions have different restrictions. If you are providing services in Mainland China, require the contract to specify: “If tokens cannot be issued due to regulatory reasons, the company shall compensate in fiat or other equivalent forms.”

In regions like the US, also clarify details such as 83(b) options, tax timing, withholding schemes, etc.

This part may seem “tedious,” but it determines whether your tokens can finally enter your wallet. Without these clauses, risks often explode at the most critical moments:

• No written agreement means it’s hard to prove any incentive promises, and legally, your rights may not even be recognized;
• No clear vesting mechanism allows the company to stop issuing tokens at any time citing “performance not met” or “goals not achieved”;
• No explicit delivery terms means that if the project delays transfers after TGE, you cannot recover or hold the project accountable;
• No compliance and tax arrangements could result in tokens being banned due to regulation, leaving you with no tokens and no compensation.

In other words, the simpler the contract, the more complicated your rights protection becomes.

Only when all key conditions are clearly written into the agreement can token incentives shift from “oral trust” to “legal rights.”

Those “Seemingly Small” Fine Print in Contracts

A qualified token incentive agreement should not just be a template, but clearly specify key details such as:

• Grant amount and type: Token Grant, Option, RTU, etc., with precise and traceable quantities;
• Vesting rules: Start date, cliff period, linear release pace, aligned with TGE timing;
• Lock-up and unlock: Clearly specify lock-up duration after TGE to prevent “unlocked but not listed” false fulfillment;
• Termination and acceleration mechanisms: Define Good Leaver / Bad Leaver; rights protection during control changes;
• Tax and compliance declarations: Avoid violations of local cryptocurrency payment bans;
• Dispute resolution clauses: Include “emergency arbitration” or “temporary injunction” mechanisms, effective before TGE;
• Risk disclosures: State token price volatility and regulatory risks to prevent project teams from disclaiming “risk not disclosed.”

Each of these “legal clauses” corresponds to real-world painful cases.

Final Words

In a truly mature Web3 world, code executes, and contracts build trust.

Don’t let your efforts and contributions turn into “air incentives.”

The promises you write, the agreements you sign, and the on-chain credentials are your certainty in this high-volatility world.

When the next TGE arrives, may your wallet contain not just screenshots and regrets, but the real value that belongs to you—written into contracts and realized on-chain.