Use Cases
While Lockup and Flow both are general-purpose protocols that can be used for a wide variety of applications, some use cases are more popular than others. In this article, we will cover the primary reasons people are using Sablier Lockup and Flow.
Sablier Lockup
Sablier Lockup requires upfront deposit of the tokens into the streams. They have a start time, and an end time, and therefore are a great fit for Vesting and Airdrops.
Vesting
1. Efficiency
Traditional vesting schemes require a lot of manual input. Payments must be processed manually over an extended period, demanding continuous dedication from the treasury management team. The treasury admin has to initiate numerous transactions each month to compensate contributors and oversee the vesting of employees and investors
As a result, traditional vesting proves to be labor-intensive, prone to errors, and ultimately delivers a subpar user experience for everyone involved. Organizations need to devote considerable time to administer funds, while recipients wait months, quarters, or sometimes even longer to obtain their compensation.
Sablier solves these problems by automating the entire vesting process.
The initial setup involves creating the streams, which only needs to be done once. You simply specify the total duration of the stream (e.g., two years), and that's all - no further actions are required from you. With Sablier, vesting is a "set it and forget it" process.
Then, recipients receive their compensation gradually over time: with every second that passes, they receive a fraction of their allocated compensation. This model aligns with the incentives of both parties. The organization only needs to spend time once, to create the streams, while recipients receive the funds gradually over time, allowing them to manage their finances as they wish.
2. Schelling points
In game theory, a "focal point" (also called Schelling point) is a solution that people tend to choose by default in the absence of communication.
Since traditional vesting contracts have a predictable release schedule, the day on which a vesting period unlocks may be used as a Schelling point for speculation. As a result, some token holders may dump their tokens as soon as they receive them.
By contrast, Sablier streams distribute a fraction of the total payment every second to recipients, enabling them to withdraw a portion of funds at any time. This effectively addresses the problem of coordinated dumping.
3. Transparency
It's hard to aggregate discrete payments, which is why they typically lack transparency. Just by looking at a transaction on Etherscan, it's difficult to pin down to whom it was made, or for what purpose. This issue is particularly relevant to DAOs, where transparency is critical to enabling contributors to understand how the treasury funds are allocated and for what purposes.
With Sablier streams, the issues mentioned above are avoided. Anyone can use the Sablier Interface to monitor all streams created by a particular address, as well as all transactions associated with each stream.
To illustrate this, here's an example of a stream as viewed on the Sablier Interface.
Airdrops
This section explores why streaming provides a superior method of distributing tokens compared to simple airdrops.
1. Flaws in simple airdrops
Retroactive airdrops have become a common practice in the cryptocurrency industry. They are often used to launch new tokens, and for good reason: it allows for the distribution of project ownership to the right people.
However, the traditional way of running airdrops is flawed, because the majority of recipients typically sell their tokens immediately after claiming them. As a result, the interest gathered by these airdrops is short-lived.
Simple airdrops fail to incentivize community members to think long-term. Recipients receive all of their tokens at once, rather than over time. This is problematic, because community members are the backbone of a crypto project, and losing their support immediately after the airdrop is not ideal.
Fortunately, there is an elegant solution that encourages long-term thinking among community members. By streaming your airdrop with Sablier, you can ensure that community members prioritize the project's future. This approach creates the right incentives for members to think about the project's long-term success.
2. Streaming airdrops
Instead of airdropping the entirety of the token allocation all at once, airdrop recipients receive a fraction of the tokens every second through a Sablier stream.
A stream can have any duration you want. You can choose to vest your new token over a period of 6 months, 2 years, or any other duration you prefer. This way, airdrop recipients are forced to think about the project's long-term development and stay engaged with it.
- The token price may fluctuate over time, which motivates recipients to do whatever they can to increase the price.
- In cases where a recipient fails to remain involved with the project, the creator of the airdrop has the ability to cancel the recipient's stream. Canceling a stream will not undo any tokens that have already been streamed, but it will prevent the recipient from receiving any more tokens.
If you are interested in airdropping your token, check out Sablier Airstream, which you can use to create an airdrop campaign using Merkle tree.
Sablier Flow
Unlike Lockup, Sablier Flow does not require upfront deposits, have no specific start and end time, and therefore offers more flexibility. This is best suited for payrolls and grant payments as described below.
Payroll
We all receive our salaries at the end of every month. What if your salary can be streamed to you in real time? Why should you wait for a month when you can get it every second? You can ask your employer to pay you using Sablier. Streaming salaries through Sablier can significantly enhance employee satisfaction and retention.
Your employer can create a Flow stream and keep funding it at the end of every month or in advance for you to withdraw your money.
The benefits outlined in the "Efficiency" section earlier apply equally to this use case, since traditional payroll solutions, like vesting schemes, can be both labor-intensive and prone to errors.
Grants
Grants are a powerful use case for Sablier, allowing for efficient, transparent, and flexible distribution of funds to grant recipients.
Uniswap Governance used Sablier to distribute grant to DeFi Education Fund. You can find more details on it here.
1. Transparency
Sablier enables real-time streaming of funds, ensuring transparency in how grants are distributed. Your stakeholders can monitor the flow of funds, providing assurance that the money is being used as intended.
2. Pay as they deliver
Instead of lump-sum payments, you can use Sablier to stream funds continuously over a specified period. This ensures recipients have a steady cash flow and reduces the risk of mismanagement of funds. If grant recipient stops working on their project, you can cancel the stream and retrieve back the remaining funds.
3. No Administrative Overhead
All streamings through Sablier are automated, which means, you don't have to send funds manually at the end of every month.