"Lock-in" is a magical existence in the field of digital asset investment. The various lock-up rules and unlocking methods are dazzling and have become a unique landscape. This article aims to explore the logic, motivation, pros and cons of locking.
01. Filecoin is currently the hottest project on the market, so please use it to start this article.
Filecoin's lock-up rules are considered complex in many projects in the industry and have relatively good exploration value.
I briefly described the core hedging rules:
(1) Early investors have different token cost discounts, and the linear release cycle includes 6 months, 1 year, 2 years and 3 years.
(2) The three official parts hold a total of 400 million tokens (20% of the total), and 182,500 tokens are linearly unlocked and released every day. The cycle is 6 years. The official verbal promise will not be sold soon.
(3) Miners unlocked from 21,000 to 50,000 in the first 30 days, which are mainly divided into the premise space race and mining block rewards. The mining rewards of the space race will be released linearly within 6 months, and the main net will be online. Subsequent mining rewards will also be released in 180 antennas. At the same time, for miners, Filecoin's economic model stipulates that miners need to use pre-mortgage to mine, that is, miners need tokens for mortgage before encapsulating the department to ensure that miners can complete the department's promised life cycle.
Then, implicitly participated in a multi-party interest game: Institutional investors and individual investors certainly hope that the token can rise and rise after it goes online. The higher the better, this is its biggest and most direct source of profit. For miners, due to pre-mortgage, even with current computing power, miners need to mortgage about 135,000 tokens per day to enable mining machines to run the packaging industry normally. At the current price of US$45, or US$6.07 million in funds (to simplify the model, the tokens released by miners are not considered), the mining rewards obtained will be linearly released for 180 days. Therefore, of course, miners currently hope that the price is as low as possible, and then collect the tokens needed for future mining mortgages. As for the secondary market of the project, the miners who are currently the largest potential buyer are reluctant to buy because the price is too high, and even shut down the mining machine to compete with the official to get a proposal that is beneficial to them. At the same time, as the largest supplier, investors and project parties continue to unlock them at a rate of 530,000 per day. The serious imbalance between supply and demand in the secondary market makes FIL prices go higher and lower, not surprising.
02. The concept of "lock-up period" is very common in the stock market
It is mainly aimed at company executives and institutions to prevent company executives or institutions from cashing out at the beginning of the market, which will seriously affect stock prices. In the long run, company executives also need to consider maintaining the same interests of individuals and company shareholders during the lock-up period.
03. The characteristics of the stock market and the current digital asset field determine that the results will be completely different when both are facing a lock-up period.
Stocks (mainly ordinary shares here) correspond to the company's dividend rights and ownership, while most listed companies are relatively mature, with stable cash flow income and mature valuation models. Then, during the stock lock-up period, whether it is the corresponding institution or individual investors, there is a relative bottom line, because even if the company is scattered on the scene, it can also allocate a corresponding proportion of assets. In the current digital asset investment field, apart from exchanges, there is almost no mature cash flow income and no market-recognized valuation model. If the project is disbanded on the spot during the lock-up period, the token holders during the lock-up period will have less than one gross.
Frankly speaking, the current blockchain projects are almost all experimental products. The future of the project is uncertain. The tokens issued by the experimental products used in the secondary market have no cash flow and no valuable assets. If you use stocks, the "lock-up period" gameplay is unfair and objective. As the name suggests, restricting early selling pressure in the secondary market is beneficial to all stakeholders. In reality, most of the time, it has become the lock-up period, that is, the high price point.
From a supply and demand perspective, this is easy to understand. In the experimental phase, there is no cash flow and no application scenarios. The token is just a speculative tool. When the price is most favorable, it should be when liquidity is small. Therefore, online has become the curse of many projects. Finally, from experimental products to relatively mature experimental products (such as ETH), it must be a good project that can finally escape the curse.
04. Summarizing the problems I encountered in the investment experience in major markets in the past few years, I will try my best to participate in projects that do not have complicated lock-up rules.
The simple logic is that for experimental products, locking is of course beneficial to the project party itself without any harm, but for investors, locking does more harm than good. Experimental products, corresponding prices, must of course be freely priced in the secondary market. During the experiment, let the price continuously reflect the effect of the experiment. Lock-in obviously made this pricing mechanism lose its due effectiveness, turning short-term pain into long-term pain, and even in the end, it turned into a stubborn disease of ineffective medical treatment, and finally gave up.
Just like when I first started investing in Polkadot, a big foundation is that for such a high-value project, almost all investors' tokens will not be locked. After the launch, the market quickly re-prices and redistributes, without long-term sustained selling pressure release. It seems simple, but in fact it is the embodiment of the great wisdom and wit of the project.
Finally, regarding the lock-in behavior in the field of digital asset investment, one summary is: This is an experimental product, try not to lock up positions, let those who want to go go, and keep those who want to stay, and let the market set prices. Investors are beneficial and fair in the long run. As for investors, it is better to be more expensive than to buy a bargaining chip with harsh lock-up conditions. After all, it is not impossible to return to zero.