Deciphr Academy
Track 6 · Module 28 · Lesson 4 of 7 · 9 min read

How are crypto grants paid out?

Short answer

Many programmes pay in stages, releasing a slice of the grant each time a reviewer accepts a milestone.1,2,3 Payment may come in ETH, in USDC, or in a network's own token, and token grants can come with a lock-up or vesting, so their dollar value can change before you can sell them.4,5,6,7

A grant of 240,000 tokens, paid in three slicesM1: 25%60,000M2: 35%84,000M3: 40%96,000each slice is paid when a reviewer accepts that milestoneThen a lock-up or vesting can decide when tokens may be soldcliffendvestedVesting: nothing before the cliff,then a straight line to the end.Lock-up: no selling for a set time.
Fig. 4. Each accepted milestone releases its slice of the grant. A lock-up or vesting schedule can then decide when the tokens may be sold.

Paid in stages

Gitcoin describes milestone-based funding as paying out "in staged tranches". Each slice is released only after agreed work is checked.1 Each milestone gets its own slice of money, a target date and a test for when it is done ("acceptance criteria").1

  • Start-up money. Some programmes pay a first slice on approval, to cover early costs.1
  • Checking the work. The grantee shows evidence, such as code or a report. A reviewer checks it against the agreed test.1
  • If work is not done. Later slices "may be withheld, renegotiated, or cancelled".1

Real programmes follow this pattern. ESP agrees "a clear grant structure with milestone-based payments", and a Grant Evaluator reviews each milestone.2 The Arbitrum DAO's Season 3 paid only after a project completed a milestone and verified it with its reviewer.3 It paid early only "in exceptional cases", such as economic distress.3

Gitcoin warns of one side effect. Grantees may aim to pass the test rather than to make the most long-term impact.1

How we work out milestone payments

Payment for a milestone = total grant × that milestone's share. Released so far = the payments for every accepted milestone.1

Example: a 200,000-token grant split 20%, 30% and 50%. After two milestones are accepted, 40,000 + 60,000 = 100,000 tokens have been released, and 100,000 are still to come. The quizzes use this method.

What you are paid in

Programmes pay in different assets.4,5,6

  • ETH. ESP pays "on-chain in ETH by default", and says applicants must be able to receive and manage ETH safely. It considers exceptions only in limited cases, where legal or practical limits stop an applicant receiving ETH.4
  • USDC. In the Arbitrum DAO's Season 3, applicants asked for amounts in USDC.5 Its issuer, Circle, says USDC can be redeemed 1:1 for US dollars.8 The DAO had funded the programme in its ARB token, which was then converted into USDC.3
  • The network's own token. Grants from Optimism's Governance Fund were paid in OP. Its policies say recipients must be able to accept OP.6

Some programmes mix them. In September 2026, the Arbitrum Foundation said its Security Program committed about $7.8 million, made up of 1.76 million USDC and 25 million ARB, "at today’s market prices".9

A token grant's dollar value moves

That phrase, "at today’s market prices", matters.9 A grant set in tokens is worth the number of tokens times the price on the day you look. The US tax authority, the IRS, tells US taxpayers to keep records of the fair market value, in US dollars, of digital assets they receive as income.10

How we work out a token payment's value

Value in dollars = number of tokens × price per token on the day the payment arrives.10

Example: 100,000 tokens are worth $50,000 at $0.50, but $30,000 at $0.30. The quizzes use this method.

Lock-ups

Some programmes say you may not sell grant tokens for a while. Optimism's Collective Grant Policies, last edited in May 2025, cover grants from its Governance Fund, not Retro Funding. They say OP from most of those grants "should not be sold by the grant recipient for a period of one year".6 Grants of OP meant for users have a stricter rule: the recipient must never sell them, and gives them out to users instead.6

The rule covers more than plain selling. An "effective sale" includes pledging the tokens, using them as collateral for a loan, or creating derivatives on them.6

A 2023 post on Optimism's forum gave reasons for the lock. It creates "long-term incentive alignment". OP is a governance token, "not intended to fund operations". And the lock reduces legal risk for the Foundation and the grantees.11

Optimism's councils have gone

In July 2026 Optimism's governance voted to dissolve the Grants Council, which decided Governance Fund grants, and the Milestones and Metrics Council, which checked their milestones. The Foundation now makes select grants itself and monitors milestones on existing ones. The policies quoted here describe how those grants were run.12,13,14,6

Vesting and cliffs

Vesting releases tokens bit by bit over time. OpenZeppelin publishes a library of smart contract code. It includes a "vesting wallet" that releases tokens to its owner according to a schedule. By default, the schedule is a straight line.7

A cliff is a waiting period at the start. OpenZeppelin's cliff version releases nothing until the cliff date is reached.7 It also warns that whoever controls the wallet can transfer it, so "it is possible to sell unvested tokens". Code alone may not enforce a no-sale promise.7

How we work out vesting with a cliff

This follows OpenZeppelin's default straight-line schedule with a cliff. Before the cliff: nothing. From the cliff on: total × months since the start ÷ total months. After the end: everything.7

Example: 120,000 tokens vest over 12 months with a 3-month cliff. After 2 months: 0. After 4 months: 40,000. After 6 months: 60,000. After 12 months: all 120,000. The quizzes use this method.

Clawbacks and deadlines

Programmes also say what happens if things go wrong.6,3

  • Clawback. Under Optimism's policies, failing to complete "critical milestones" will "trigger clawback of any remaining locked tokens".6
  • Deadline to collect. Optimism's policies gave recipients 90 days after the Grants Council's decisions were posted to complete KYC and collect their grant.6
  • Deadline to finish. Arbitrum's Season 3 gave grantees six months after their identity checks. If the work wasn't done by then, the remaining funds were kept by the programme, then given to new projects or returned to the DAO.3
Our viewA grant paid in a token that moves a lot is part grant, part exposure to that token. The number of tokens is fixed; what they buy is not.
Sources
  1. Milestone-Based Funding. Gitcoin, mechanisms library (read 22 October 2026).
  2. How to Apply: process. Ethereum Foundation, Ecosystem Support Program (read 22 October 2026).
  3. [RFC] Arbitrum D.A.O. (Domain Allocator Offerings) Grant Program - Season 3. Arbitrum DAO governance forum (post last edited 15 July 2025), 19 November 2024.
  4. How to Apply: FAQ. Ethereum Foundation, Ecosystem Support Program (read 22 October 2026).
  5. Arbitrum D.A.O. Grant Program Season 3 - Official thread. Arbitrum DAO governance forum (opening post last edited 13 January 2026; thread read to its report of 22 July 2026), 19 March 2025.
  6. Collective Grant Policies. Optimism Collective governance forum (post last edited 8 May 2025; read 22 October 2026), first posted 6 April 2023.
  7. Finance: VestingWallet and VestingWalletCliff. OpenZeppelin Contracts 5.x documentation (read 22 October 2026).
  8. USDC. Circle, the issuer of USDC (read 22 October 2026).
  9. Introducing the Arbitrum Security Program: Apply to Secure Your Smart Contracts. Arbitrum Foundation blog, 28 September 2026.
  10. Digital assets. US Internal Revenue Service (page last reviewed or updated 2 September 2026).
  11. Grant Token Lock Explainer. Optimism Collective governance forum, 2 February 2023.
  12. Grants Council Dissolution Proposal. Optimism Agora, Token House vote page (read 22 October 2026).
  13. Milestones and Metrics Council Dissolution Proposal. Optimism Agora, Token House vote page (read 22 October 2026).
  14. Council Dissolution Proposal: Dissolve the Milestones and Metrics Council. Optimism Collective governance forum, 25 June 2026.
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General education built from the publicly available sources listed above. Not financial, legal, tax or investment advice. Naming a company, project or regulator is not an endorsement either way. Last checked 2026-10-22. Terms and disclaimer.