Definition ∞ A supply lock mechanism refers to a protocol feature that restricts a portion of a digital asset’s total supply from being actively traded in the market. Assets can be locked through staking, burning, or being held in smart contracts for various purposes, such as governance or liquidity provision. This mechanism effectively reduces the circulating supply, which can influence price dynamics by increasing scarcity. It often incentivizes long-term holding.
Context ∞ Supply lock mechanisms are a fundamental aspect of tokenomics for many digital asset projects, influencing market behavior and investor confidence. Discussions often revolve around the proportion of supply locked and its impact on price stability and network security. A key future development involves dynamic lock mechanisms that adjust based on network conditions or governance decisions.
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