Token Lockup

A token lockup is a period during which tokens cannot be sold or moved, enforced by a smart contract, a custodian or a legal agreement. Lockups are most common for allocations to founders, employees and early investors, who typically receive tokens on a vesting schedule with an initial cliff followed by gradual releases, so they cannot sell everything as soon as trading begins. They resemble the lock-up periods that restrict insiders after a company's stock market listing. Tokens may also be locked when they are staked to secure a network, or when a project's trading liquidity is placed in a token locker to reassure buyers, a practice known as liquidity locking. The end of a lockup, called a token unlock, can add a large supply to the market and is often watched for possible selling pressure. Lockups reduce, but do not remove, the risk of insiders dumping tokens.