Definition ∞ Token locking involves intentionally restricting the transferability or use of a specific quantity of digital tokens for a predetermined period. This mechanism is often implemented to align incentives, secure network operations or manage token supply dynamics. Participants might lock tokens to earn staking rewards, gain governance rights or demonstrate long-term commitment to a project. It reduces circulating supply, potentially influencing market valuation.
Context ∞ Crypto news frequently reports on token locking events, such as vesting schedules for team tokens or staking initiatives for network security. These events are closely watched by investors as they can impact market liquidity and price stability. The duration and quantity of locked tokens often signal the project’s long-term viability and the commitment of its stakeholders. Understanding token locking mechanisms is important for assessing a project’s economic model and potential future supply shocks.
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