What is locking

The primary difference between locking and staking is that locking does not involve incentivizing validators or node operators to perform protocol work. Locking will be encouraged with fees incurred by the project or newly issued tokens. Locking mechanisms are used for the following reasons.

• Lending. Some companies use the term staking when what they really are doing is lending. Lending involves a counterparty entity who pays interest, while for staking, the protocol is the one paying rewards.

• Governance (ve token models). Projects will ask users to lock tokens for a certain duration to earn varying levels of governance votes. The longer the tokens are locked, the more valuable the votes become. In return, lockers receive a share of the projects’ revenues or a portion of new tokens released.

• Liquidity pools and pool 2. Projects will create more liquidity for tokens by making users LP into AMM pools and stake the LP tokens. Alternatively, they will create a liquidity sink by making users lock in the tokens themselves. In both cases, lockers receive a share of the projects’ revenues or a portion of new tokens released.

• Insurer of last resort. Projects will ask users to lock in tokens to be the insurer of last resort. As an example, for certain lending protocols, staked tokens could be sold off to backstop bad debt. Lockers receive a share of the projects’ revenues or a portion of new tokens released in return.

Many projects will use the term "staking" to describe locking. These are fundamentally different mechanisms and should not be conflated.

ProtocolStaking will include data for locking in the future.