🔒Token Locks

What are Team Token Locks?

Locking team tokens involves securing the tokens allocated to a project’s team in a time-locked decentralized smart contract vault. This mechanism ensures that the project team or founders cannot withdraw or alter these tokens until the end of the lock period(s). This practice significantly reduces the risk of scams, providing greater security for the community and investors.

Using a third-party locking service represents a crucial innovation compared to traditional token offerings, where projects might fail to fulfill their promises and maliciously sell off their tokens, leaving holders, stakers, and investors with nearly worthless tokens.

Crypto projects can use Shine Pad’s Token Locks to demonstrate a vesting schedule and commitment to the project, thereby building credibility and reducing the risk of scams, which benefits the community and investors.

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How Should You Allocate Your Token Supply?

When allocating your token supply, it's important to consider the various stakeholders and how to distribute the tokens among them.

A key factor is the circulating supply, or the number of tokens that will be actively traded on the market. This impacts the liquidity of your project, affecting the ease with which its tokens can be bought and sold. Carefully consider the percentage breakdown of your tokens in circulation, including team tokens, liquidity pool (LP) tokens, and more.

There's no one-size-fits-all approach, and it may be helpful to refer to industry best practices.

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Why Locking Your Tokens is Important

For the 'Team' portion of the token allocation, it’s often advisable to lock these tokens, at least initially. Failing to lock your team's tokens after the project launch can lead to token volatility and reduced project confidence.

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Advantages of Team Token Locks:

• Help manage the overall supply of tokens in circulation and maintain the token's value.

• Prevent insider trading and ensure the team does not profit unfairly from early access to information.

• Signal to the market the team's confidence in the project's long-term potential, indicating they are committed rather than seeking a quick profit.

It's generally expected that around 20% of the token supply should be allocated to the team. If you intend to raise money from investors, locking your team tokens for a certain period is often a prerequisite. Typically, we lock 20% for the team/project for development and future listings.

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How Long Should I Lock My Team Tokens?

The length of the lockup period depends on various factors, such as the nature of your project, the development stage, and the expectations of investors and the wider community. Consulting with advisors, investors, and other industry experts can help determine an appropriate lockup period for your project.

Besides the lockup period length, consider implementing a staggered lock, where tokens are released gradually over time rather than all at once. This approach can provide more market stability and predictability and ensure that the team remains incentivized to continue working on the project long-term.