Lockdrop Vaults
What is a Lockdrop Vault?
Lockdrops are a distinctive distribution method used primarily by DeFi protocols. It allows users to lock up their existing cryptocurrency for a predetermined period, and in return, they receive a proportional amount of a new cryptocurrency. This method is often used in token launches to distribute new tokens in a transparent and fair way, without requiring participants to spend or "burn" their existing cryptocurrency.
The lockdrop model is best illustrated by protocols like Astroport, which distribute tokens to those providing liquidity in key trading pairs, and Mars, which allocates tokens according to stablecoin deposits to enhance liquidity. Unlike traditional funding methods like ICOs or IDOs, this approach is regulatory-friendly.
How do Lockdrop Vaults Work?
Lockdrop vaults allow users to lock their existing cryptocurrency or LP positions in a smart contract for a set period. During this time, they receive new tokens based on the locked amount and duration. Once the lockup period ends, the original assets are returned to the user, along with the new tokens.
At Eclipse Fi, we combine lockdrops with airdrops, where users locking tokens for longer periods receive a greater share of the airdrop, following the strategy used by Yearn Finance and ve(3,3). This approach incentivizes long-term commitment to the protocol, attracting users who contribute to its success.
Why Launch Using a Lockdrop Vault?
Launching using a lockdrop vault not only incentivises long-term usage of the protocol but also encourages active participation in the early stages. This strategy helps in creating a favourable environment for growth and development, attracting committed users and stakeholders who are likely to contribute positively to the ecosystem. By balancing immediate token distribution with rewards for extended engagement, lockdrop vaults foster community loyalty and sustained interest in the platform.
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