An important part of vetting new projects is checking whether the liquidity pool is locked or not.
Many people are confused as to how to do this. So here's a thread on one way to check for yourself if a project's LP is locked.
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Many people are confused as to how to do this. So here's a thread on one way to check for yourself if a project's LP is locked.
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First, it's important to understand WHY you want the liquidity pool to be locked.
If it's not, then the developers can literally cash in their LP tokens, leaving protocol tokens worthless.
There are two types of locks: time locks and multi-sig locks.
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If it's not, then the developers can literally cash in their LP tokens, leaving protocol tokens worthless.
There are two types of locks: time locks and multi-sig locks.
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Multi-sig is good, but if all the actors on the multi-sig are bad actors, this doesn't do you much good.
The ideal scenario for a liquidity pool is a time lock. I think 12mo + is best, but many projects are starting to do 6mo.
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The ideal scenario for a liquidity pool is a time lock. I think 12mo + is best, but many projects are starting to do 6mo.
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The project should provide you with the txn of the lock contract (usually in the Discord's 'official links'. If they don't, it is perfectly reasonable to ask for it.
Look at the txn in the block explorer and search for the following sections...
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Look at the txn in the block explorer and search for the following sections...
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Tokens transferred tells you how much of the LP is locked. This is important, as a protocol can easily claim they have a full year lock, but it's only on 5% of the pool.
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Click to see more to see the contract details.
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Then click to Decode the Input Data
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Then you will be able to see the lock-time. This is important because a protocol can easily claim the lock is for over a year or longer, taking advantage of the fact that most people don't know how to read the block explorer.
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This was the rather technical way of doing it. A MUCH easier way is to use an app called @MoonarchApp
Paste the token address in the search bar and see some awesome results.
Here's info on $STRZ. See the low lock amount? Also, the LP tokens are burnt (dev has funds now)
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Paste the token address in the search bar and see some awesome results.
Here's info on $STRZ. See the low lock amount? Also, the LP tokens are burnt (dev has funds now)
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A lot of protocols are built by excited but relatively new devs, so not every contract will be perfect (that's why V2's are common), but there are tell-tale signs of a #rugpull in how the LP is set up.
Hopefully this keeps you safe.
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Hopefully this keeps you safe.
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@PreExponential @DazaiCrypto I listened to your recent AMA and read both of your guides. I thought this info may help add some color to the locked liquidity conversation.
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