Liquidity and locks
A green tick saying "liquidity locked" is a claim with a date attached. The date is the part that decides what it is worth.
"Liquidity locked" appears on almost every launch. It is the single most repeated reassurance in this corner of crypto, and most people repeating it could not say what is locked, by whom, or until when.
The mechanism is not complicated, and knowing it turns a green tick back into a piece of information.
What LP tokens are
When somebody deposits both assets into a pool, the pool mints them liquidity tokens — LP tokens — representing their share of it. That is the receipt. To take the assets back out, the holder burns the LP tokens and receives their proportion of the pool plus accumulated fees.
So the LP tokens are the claim on the pool. Whoever holds them can withdraw the liquidity. This is the entire subject: everything called a lock or a burn is a statement about where those tokens are.
Whoever holds the LP tokens can empty the pool
Not steal it exactly — withdraw it, using the mechanism as designed. If the creator holds them, the liquidity backing the price is theirs to remove at any moment.
Three states, three very different meanings
Held. The creator keeps the LP tokens. The liquidity can be withdrawn whenever they choose, which is the classic exit — pool emptied, price to zero, holders left with tokens that nothing will buy. No warning is required and none is given.
Locked. The LP tokens are placed in a contract that will not release them until a set time. Real, verifiable, and time-limited. On the release date they go back to whoever put them there, and everything that was true before the lock becomes true again.
Burned. The LP tokens are destroyed — sent somewhere they can never be retrieved from. Nobody can withdraw that liquidity, ever, including the creator. This is the only permanent version.
The questions a lock badge does not answer
- Until whenA lock with two weeks left is a two-week promise. Read the expiry, not the badge. Locks are frequently taken out for short periods precisely because the badge looks the same either way.
- How much of itLocking a portion is common. If half the LP tokens are locked and half are held, half the liquidity can leave tomorrow.
- Who holds the keySome lockers allow the depositor to extend, or to withdraw early under conditions. The lock contract's own terms decide this, and they vary.
- Which poolA token can have several pools. Liquidity locked in one says nothing about another, and the trading may be happening in the unlocked one.
A lock protects the pool, not the price
Locked liquidity stops the pool being emptied. It does nothing about the largest holders selling their tokens into it — which drains the real asset out of the pool through ordinary trading and takes the price with it. This is the most common misunderstanding on the subject.
Burned liquidity has its own limit
Burning is permanent and it is a genuine commitment. It still leaves everything else untouched: supply held by insiders, the ability to mint more if that authority survives, and the ordinary possibility of everyone selling.
A token can have permanently burned liquidity and be worth nothing a week later, with no rule broken and nobody at fault. Burned liquidity guarantees a market will continue to exist. It guarantees nothing about the price in that market.
Checking it yourself
Every part of this is on the chain. The pool address, the LP token supply, where those tokens sit, and — where a lock contract is used — the unlock timestamp written into it. A token scanner will summarise it for you, with the limits described in what token scanners can see; an explorer will show you the same facts directly if you would rather not take a summary on trust.
What you cannot check is intent. The mechanism tells you what is possible, never what is planned.
Sources
Where the factual claims on this page come from. Each was read on the date shown.