People use cryptocurrencies for various reasons, and one of those is the earning opportunities in staking and locking up tokens. Also, you’ve read it right. We used the conjuction “and” because staking and locking up are two different things.
To shed more light on this, we’ll discuss what is token lockup, what sets it apart from staking, and how you can actually lock up KASTA tokens in Ka.app to earn yields and activate discounted service fees.
What Does Token Lockup Mean?
A token lockup refers to a period of time when cryptocurrencies are locked in a certain platform. During the lockup period, you won’t be able to use your tokens for trading, crypto payments, crypto conversions, deposits, or withdrawals. Their movement is limited according to predetermined rules or smart contracts.
Token lockups are a mechanism often implemented by blockchain projects to ensure stability, prevent price manipulation, and/or incentivise long-term participation among users.
Staking vs. Locking Up: What Sets Them Apart?
Both staking and locking up tokens involve keeping your tokens in your crypto wallet without transferring or selling them and earning rewards in the form of additional cryptocurrency. However, staking may allow you to unlock tokens anytime, unlike token lockups which may require you to complete a certain lockup period.
Staking and locking up are also different in purpose and requirements. Staking is primarily done to validate transactions and secure the network. It involves actively participating in the network's consensus algorithm, such as proof-of-stake, by staking and confirming blocks.
On the other hand, locking up tokens simply require users to hold the tokens for a specific period, without any active involvement in network activities. It prevents users from selling their tokens, especially in cases where stability and long-term commitment are desired.
How to Lock Up Tokens
The process of locking up tokens isn’t the same for all platforms. On Ka.app, you can lock up KASTA tokens and enter tiers that offer different annual percentage yields (APYs) and service fee discounts.Here’s a step-by-step guide:
- Log in on your Ka.app account.
- Go to the home screen and click 'Tiers.'
- You will see different tiers. Click the tier you want to enter. For instance, Tier VII. This tier offers the highest possible APY and best transaction rates.
- Enter the number of tokens you want to lock up.
- Continue by agreeing to the terms and conditions.
- Enter your passcode to enter Tier VII.
Final Thoughts
Knowing what is token lockup is essential in navigating your crypto journey with ease. Token lockups play a vital role in shaping the dynamics of the crypto market, helping promote investor confidence and fostering a stronger connection between token holders and the projects they support.
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FAQ
How long are the lockup periods?
Lockup periods may be different for each platform. On Ka.app, you’re required to lock up tokens for six months to get the APY.
What is the difference between vesting and lockup?
Vesting and lockup are both mechanisms used in the crypto space to regulate the release or transfer of tokens, but they differ in their purpose and implementation.
Vesting is a gradual release of tokens over a specified period, while lockup refers to a fixed period during which tokens are restricted from being sold, transferred, or utilised in any way.
Vesting is commonly used to align incentives and reward long-term commitment, whereas lockup is primarily employed to regulate token supply and market dynamics.
What happens when the tokens get unlocked?
In Ka.app, your tokens will automatically get unlocked after the six-month lockup period, and you’ll also get your earnings. Since the lockup period is over, you can already use your tokens for transfers, peer-to-peer (P2P) crypto payments, and conversions. You may also lock your tokens up again.
FAQs
The term token lockup refers to a specific period of time in which cryptocurrency tokens cannot be transacted or traded. Typically, these lockups are used as a preventive strategy to maintain a stable long-term value of a particular asset.
What does "locking tokens" mean? ›
A token lockup refers to a period of time when cryptocurrencies are locked in a certain platform. During the lockup period, you won't be able to use your tokens for trading, crypto payments, crypto conversions, deposits, or withdrawals. Their movement is limited according to predetermined rules or smart contracts.
What is the difference between token lockup and vesting? ›
It refers to a fixed period during which tokens cannot be sold or transferred. There's usually a "cliff," after which the lockup period ends, and all tokens become immediately transferrable. Unlike vesting, lockup doesn't involve gradually releasing tokens but holds them back entirely for a set period.
What is a crypto lockup? ›
Lock-up Period is a pre-planned span of time, usually following a token sale when token holders of a cryptocurrency project are prohibited from selling their tokens. The Lock-up Period helps projects avoid liquidity problems while they are still in the process of strengthening their supporter base.
How does crypto locking work? ›
Staking is when you lock crypto assets for a set period of time to help support the operation of a blockchain. In return for staking your crypto, you earn more cryptocurrency. Many blockchains use a proof of stake consensus mechanism.
What does it mean when a coin is locked? ›
Locked Cryptocurrency: This typically means that the tokens or coins are not currently accessible for transactions. They might be subject to a smart contract or specific conditions that restrict their movement until certain criteria are met.
What is the difference between staking and locking? ›
- Staking requires the user to participate in the network's consensus algorithm, while locking simply requires the user to hold the tokens for a specific period of time.
What is the difference between vesting and lockup? ›
The vesting period ensures that the employee will remain with the company for a certain period of time, which can help to reduce turnover. Additionally, the lockup period ensures that the employee will hold onto the stocks for a certain period of time, which can align their interests with those of the company.
What is a lockup in investing? ›
A lock-up period, also called a locked-up, lock-in, or lock-out period, refers to the predetermined time frame in which corporate insiders, investors, and employees are not allowed to sell or redeem their shares after an initial public offering (IPO).
What's the deal with token vesting? ›
Token vesting is a mechanism that allows Web3 companies to distribute tokens to their employees and other service providers over time, subject to certain conditions or milestones. Similar to ESOPs, token compensation plans typically have vesting schedules, with cliffs/lockups.
If an exchange detects any red flags, such as inconsistencies in user information or transactions that resemble money laundering, it may freeze the user's funds to conduct further investigation. Suspicious Activity and Fraud Prevention Exchanges actively monitor transactions for signs of fraudulent behavior.
What happens when tokens are unlocked? ›
Token unlocks are pivotal moments in the lifecycle of a cryptocurrency project. They mark the release of previously locked or vested tokens into circulation. This can lead to significant shifts in market dynamics, as the sudden availability of large tokens can influence supply, demand, and price movements.
How to check token lock? ›
Search for the token with its name or contract address. In the token information, check Liquidity info. If it has a green padlock, that simply means the liquidity is locked, and it is safe to trade the token. You can view more information about lock percentage and duration by clicking on the lock.
Does staking crypto lock the price? ›
Staking often requires a lockup or “vesting” period, where your crypto can't be transferred for a certain period of time. This can be a drawback, as you won't be able to trade staked tokens during this period even if prices shift.
What is the difference between locked and unlocked crypto? ›
Token Unlock is a process where previously locked tokens are moved into the private crypto wallets of initial investors, team members or partners and become freely tradable on the market, which can have a significant impact on the price of those cryptocurrencies and thus the value of your portfolio.
How does locking work? ›
When a key is inserted into the lock they press against the pin tumblers forcing them into the upper chamber pins and compressing the springs. They pins are then pushed to align flush with the shear line. The pins are designed to be different in height and configuration.
What does it mean to unlock a token? ›
Token Unlock is a process where previously locked tokens are moved into the private crypto wallets of initial investors, team members or partners and become freely tradable on the market, which can have a significant impact on the price of those cryptocurrencies and thus the value of your portfolio.
What is the meaning of coin lock? ›
also : a lock operated by inserting a coin which releases the key.
What happens to price when tokens are unlocked? ›
How Does Unlocking Tokens Impact Price? Unlocking tokens can influence price through changes in supply and demand dynamics. While increased supply can exert downward pressure on prices, positive market sentiment or increased demand can counterbalance this effect.
Can you transfer locked tokens? ›
This mechanism is designed to immobilize selected tokens for a set period, without necessitating their transfer to another entity. During this lock period, these tokens are rendered non-transferable and cannot be used in transactions.
