Liquidity Lockers
A liquidity locker allows the developer to store LP tokens in a smart contract, revoking their permission to move these LP tokens until a set unlock time.
Last updated
A liquidity locker allows the developer to store LP tokens in a smart contract, revoking their permission to move these LP tokens until a set unlock time.
Last updated
Please be aware that this Solana program is being posted as open-source and has not yet undergone a professional audit. We encourage community participation and scrutiny; however, until a comprehensive audit is completed, please understand that using this program is at your own discretion and risk. We do not guarantee the security or functionality of the program and advise users to proceed with caution, especially in transactions involving significant assets or funds.
Liquidity lockers are mechanisms used primarily in the decentralized finance (DeFi) space to ensure that the liquidity provided to a liquidity pool, often for a new cryptocurrency or DeFi project, remains locked for a predetermined period. This concept is most commonly applied on decentralized exchanges (DEXs) like Uniswap or SushiSwap in the Ethereum ecosystem, where liquidity is essential for enabling the trading of cryptocurrencies without the need for a traditional market maker.
Our goal with this integration is to create a safer, more transparent environment to protect users within the Solana ecosystem by bringing these concepts over for AMM's like Raydium, Meteora, and eventually the Guacamole AMM.
Liquidity Provision: When a new token is launched, the project’s team will typically provide an initial pool of liquidity, meaning they contribute a certain amount of their token and a corresponding value of another established token (like USDC or SOL) to a liquidity pool. This allows other users to trade the new token.
Locking Mechanism: Instead of leaving the possibility open for the initial liquidity to be withdrawn at any time (which could result in a "rug pull," where the creators suddenly remove liquidity and abscond with the funds, leaving the remaining token holders with a worthless asset), the initial liquidity is locked. This means the tokens cannot be withdrawn from the liquidity pool until a certain time has passed or specific conditions have been met.
Programmatic: Liquidity lockers use on-chain programs to enforce the lock-up period. They are programmed to prevent the withdrawal of the liquidity before the expiry of the lock-up term. This contract is typically visible and verifiable by anyone on the blockchain, adding to its trustworthiness.
Conveying Trust: By locking liquidity, project developers signal to potential traders that they are committed to the project's longevity and that they cannot simply take the provided liquidity and disappear. It reduces the risk of rug pulls and adds a level of security for traders who might be concerned about the potential for immediate or unexpected liquidity withdrawal.
Transparency: Since the programs are on-chain, the terms of the liquidity lock are fully transparent and can be audited by anyone, further enhancing trust in the project. Participants can see exactly how much liquidity is locked and for how long.
Time-Bound Commitment: The lock-up period can vary, often ranging from months to years. The choice of this period also signals the developers' confidence and long-term planning for the project. Longer lock periods might suggest a greater commitment to the project’s future.
Unlocking Conditions: Some liquidity lockers might have conditions under which liquidity can be withdrawn, like achieving certain project milestones, which can also contribute to a more trustworthy ecosystem by aligning the project's success with the liquidity release.
Community Trust: If a project locks its liquidity, it is often taken as a sign of good faith, which can help in building a community around the project. A strong community further contributes to the project's credibility and success.
A currently popular mechanism for locking liquidity in the Solana ecosystem is by burning the LP redemption tokens, similar to Guacamole when we initially set up our liquidity within Raydium.
This new locking process allows developers and projects to display an easier form of transparency instead of sharing or linking a burn transaction. The interface will also display the total ratio of each Liquidity pool locked in the Guacamole contracts.
The ability to withdraw LP after unlock also allows these projects to move liquidity and even shift pairs (from USDC to SOL) if necessary before relocking again.
This includes regular Raydium and Meteora Pools
Initial Locker Creation Fee: 100m GUAC & 0.1% of the locked LP
Liquidity Pool Relock: 100m GUAC & 0.1% of the locked LP
The 500m GUAC collected will be deposited into the AvocaDAO treasury
Transparency Statement: The collected fees of locked LP tokens (0.1%) are managed by the AvocaDAO council in the intermediary DAO wallet. Better project tokenomics, development, and community building will lead to a longer-term horizon outlook on the management of this position with ecosystem health and DAO growth in mind. Guacamole aims to build several fee-generating treasury positions alongside new community projects. The position may be fully transferred to long-term AvocaDAO treasury or paired against GUAC in a new Liquidity Pool depending on these guidelines.
Our fee structure for this system is super competitive when compared with platforms like UNCX on other blockchains which may charge a 1% fee and larger initial setup costs.