What Is A Token Lockup?
A token lockup is a certain amount of time when tokens are incapable of being transacted and/or traded. Also known as vesting periods, these usually after an initial coin offering (ICO), and affect a certain amount of owners – typically the core developers, founders, and backers of the project.
Token lockups help stabalize a cryptocurrencies liquidity, preventing a large amount of tokens hitting the circulating supply at once. They also help prevent the people behind the project from rugpulling, and incentivizes them to devlop the token without trying to quickly make money.
Tokens are locked through the use of smart contracts, which once deployed are immutable and will only ever release the tokens once the contract has run its course. The tokens are stored in cold wallets, usually being shown to the public to instill trust with the team behind the project.
