Liquidity Lockers
Last updated
Last updated
To comprehend liquidity locks, it's crucial to grasp the functioning of decentralized exchanges (DEX) and Liquidity Pools (LP) first. If you're not already acquainted, we suggest watching the following .
A Liquidity Lock is a mechanism designed to prevent the withdrawal of funds from a liquidity pool or individual tokens for a specified period. This lock can apply not only to Liquidity Provider (LP) tokens but also to regular tokens.
For LP tokens, a Liquidity Lock is achieved by transferring the LP tokens to a time-locked smart contract, typically through liquidity-locking services such as Team Finance. Token holders can specify the lock's duration, divide locks into smaller ones with different owner addresses and end dates, and transfer lock ownership to another wallet address. While the lock is active, the token holder cannot access the tokens.
Similarly, for regular tokens, a Liquidity Lock entails sending the tokens to a smart contract with time-based restrictions, preventing them from being moved or transferred until the lock expires.
Once the lock period expires, the token holder can regain access to their tokens or LP tokens. For LP tokens, holders can withdraw them using the 'Claims' dashboard on platforms like Shine Pad. These LP tokens can then be exchanged for the token pair within the liquidity pool on a decentralized exchange (DEX) (e.g., SPD/SC20 on ). Liquidity pools contain funds locked into a smart contract that users provide to facilitate trading on a DEX.
Liquidity Pool (LP) Tokens are a type of cryptocurrency token representing ownership of a portion of the tokens contained within a liquidity pool. When you list a token on a decentralized exchange (DEX) such as Uniswap or contribute to an existing token pair pool, you will receive what is known as 'Liquidity Pool (LP) Tokens.'