Capital Lock Up

Definition ∞ Capital lock up describes the process where a portion of an investor’s capital is made inaccessible for a predetermined period, often as a condition for participation in an investment or protocol. This mechanism is frequently used in cryptocurrency staking, liquidity provision, or initial coin offerings to secure network operations or demonstrate long-term commitment. The locked capital may earn rewards or provide governance rights during this duration. It influences the liquid supply of an asset.
Context ∞ Capital lock up mechanisms are a significant aspect of many decentralized finance protocols, influencing token economics and network security. The duration and terms of capital lock ups are frequently discussed in crypto news, especially concerning their impact on market liquidity and investor participation. Projects often adjust these parameters to optimize network stability and incentivize desired user behavior.