Locked Liquidity
Liquidity pool tokens deliberately locked in a time-locked smart contract for a set period, preventing a project's team from withdrawing the underlying liquidity and used as a rug-pull mitigation signal.
Locked liquidity refers to LP tokens (see Kaavon's "LP Token" glossary definition) representing a project's own liquidity pool (see Kaavon's "Liquidity Pool" glossary definition) position, deliberately deposited into a time-locked smart contract that prevents the team from withdrawing the underlying liquidity until a specified future date passes. This is commonly offered by new token projects specifically to reassure potential investors that the team can't immediately execute a rug pull (see Kaavon's "Rug Pull" glossary definition) by pulling the pool's liquidity shortly after launch.
Locked liquidity reduces, but doesn't entirely eliminate, rug-pull risk — a team can still exploit other mechanisms, such as a hidden minting function in the token's own contract, even with its liquidity genuinely locked, and investors should verify the specific lock duration, the lock contract's own legitimacy, and whether the locked amount represents a meaningful share of total liquidity rather than just a small, mostly symbolic portion. A longer lock duration from a reputable, independently verifiable locking service is generally considered a stronger trust signal than a short lock or one using an obscure, unverified locking contract.
Examples
- A new token project locking its liquidity for a year through a reputable, independently verifiable service offers a stronger trust signal than one using only a short, obscure lock.
- Locked liquidity doesn't eliminate rug-pull risk entirely, since a team could still exploit a hidden minting function in the token's own contract even with its liquidity genuinely locked away.