What Is a “Lock-up” Mechanism for Governance Tokens, and Why Is It Implemented in a DAO?
A lock-up mechanism requires governance token holders to stake or lock their tokens for a specific period to participate in voting. This is implemented to encourage long-term commitment, reduce short-term speculation, and ensure that voters have a vested interest in the DAO's sustained success, thereby improving the quality and stability of governance decisions.
Glossar
Dao Voting
TokenWeightedVote ⎊ Dao Voting describes the process where ownership stakes in the governance token grant participants proportional influence over decision-making processes affecting the protocol’s financial parameters.
Lock-Up Mechanism
Mechanism ⎊ A lock-up mechanism is a contractual or smart-contract-enforced restriction that prevents the sale or transfer of a specified quantity of crypto tokens for a predetermined period.
Vested Interest
Alignment ⎊ This refers to the degree to which the financial incentives of large token holders, often through early allocations, align with the long-term security and stability of the protocol.