THE VANISHING POINT. By Gregory Mannarino
marketreport
Understanding Token LockUp & Importance in Crypto.
lhorgic
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2024-08-20 14:34:06
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Hi friends! how are you doing? Welcome to my blog, it's super good to have you back here. I trust you got value from my last post. I bring to you another interesting content, one that I believe you would find interesting as usual. In my previous post, we explored the concept "Learn-To-Earn", you can check out my blog to read through if you haven't.
Today, we would be looking at **Token LockUp in Crypto**, what it is and what it stands for... it's actually another topic of interest I stumbled upon and felt like sharing with y'all. I hope you guys learn one or two things from this write-up.
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We have seen the emergence and disappearing of many new token happening almost at the same instance. Sometimes it just to disheartening that after so much have been put into a project to see it work, it then disappears all of a sudden especially after it hitting the market.
Many a times, it always the early investors, owners and developers who dump these token in the market, making it crash even before seeing the light of the day. Since we have seen these re-occur many times in the market, different mechanism have been put in place to guard again this and one of it is what we want to discuss today. Let's get in.
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Token lockUp can be defined as an act of locking up a token for a specific period of time which restricts the token from being transacted, meaning you cannot buy or sell it as long as its under lock up. It will only be released for transaction when the lockup period has been completed.
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This lockup process is usually done using smartcontract. This make it an automated stuff. You won't be able to terminate it until every condition for the termination has been met. These smart contract are usually hard coded which implies that modifications or adjustments of terms will be impossible once the smartcontract has been deployed.
The purpose for this lockup initiative is to help keep the project up and running. So many project died while they are yet to have a feel of the market. Many of these token were token that were launched after ICO and other related event. Those who had them took advantage of the launch to reck the token.
There is no other way to maintain the stability of a token value/price than restricting how the token is being deployed into the market especially for new tokens. Other existing token in the market would subscribe to activities like token burn and other related measures just to stabilize price but for new tokens, measure like token lock is viable.
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• **Time-Based Lockup:** under this method, token are locked up for a period of time, say 6 month - 1 year or even more and this in turn help to track the commitment of folks to the project and to test their motive to know if they are for long or short term.
• **Milestone-Based Lockups:** These are lockups that are based on project achievement. Meaning token will be released as project achieve certain feat just as earmarked in their project roadmaps.
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• **Tier-Based Lockups:** This kind of lockup is based on Tier(level/stages). When project get to certain stage in their journey, the smartcontract used to lock up token releases them based on the term of agreement. It could release a fraction (i.e 30%) of the locked token when they get to certain stage and continues the cycle.
• **Performance-Based Lockup:** Just as it name implies, it means token would be release based on the performance of the project. If it underperforms, it could remain locked until certain notable performance can be seen and recorded.
All of these measures are to track project growth and create a system of sustainability.
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• **It Instill Confidence:** Yea, this mechanism help assure investors that they are not gonna suffer some kind of unforseen wreckage with their investment because of the way the token is being controlled even after it had been launched.
• **It promote Longevity:** This help create a long term mindset in the heart and minds of investors. Locking up the token only to release it at a particular time would shows that the project is not focused on the present but the future. If token were not locked, investor are likely to dump them immediately.
• **It prevent Rug Pull:** Rug pull is another kind of exit scam that developers and owners of project uses in the crypto world. They ensure they have gathered enough from unsuspecting investors, sometimes hold more token than is necessary and then dump them when they hit a particular market value
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I believe by now you understand what the lockup is and how beneficial it is in this space. As my usual custom is, I would always encourage that you DYOR to be sure of every financial step you would want to take as I won't be liable for any form of loss encountered by you.
Feel free to share with me your thoughts in the comment section. Thanks for your time once again. Gracias!
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**Disclaimer: This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your own research and consult a financial advisor.**
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Regards
@lhorgic♥️
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