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As the crypto space evolves, more advanced systems are put in place to safeguard funds and increase the trust and transparency of a project. One of the best ways to demonstrate to a community that the team is serious about the project’s long-term health is to implement a liquidity lock and token burn mechanism, which El Hippo did in December 2023.
What’s a liquidity lock?
A liquidity lock typically refers to a decentralized finance (defi) platform mechanism that involves securing or “locking” a certain amount of cryptocurrency assets in a smart contract. This is often done to ensure the availability of liquidity for a particular decentralized exchange or liquidity pool.
Liquidity locks are intended to add transparency and trust to decentralized finance platforms. Users can verify the locked liquidity amount, ensuring the platform has the necessary funds to honor trades. It also helps prevent the so-called “rug pulls,” where malicious actors could drain liquidity from a pool and harm other users.
In some cases, a project may choose to reward the locked tokens to the community by unlocking the contract in the future and distributing funds. Another way to reward the community is to destroy locked tokens, creating scarcity for the token and increasing the demand vs supply, which often leads to a price increase.
El Hippo liquidity lock
The El Hippo meme coin project, which launched just in August of last year, has already made waves in the space, getting listed on MEXC and Bitget before hitting an all-time high in price following the announcement of a liquidity lock and burn being put in place.
El Hippo locked over $500,000 worth of HIPP in unclaimed fees on Uniswap, demonstrating to the community that the team is willing to forego potential profits for themselves for the benefit of the community.
The team has pledged to lock the contract for four months, unlock it, burn the fees, and repeat the cycle indefinitely. These regular token burns, in which tokens are permanently removed from circulation, create the exact deflationary burn mechanism that underpins Bitcoin.
El Hippo also issues regular rewards via the project’s Zealy campaign, which has proven instrumental in catalyzing price growth.
With regular airdrops, Zealy from where users are paid every two weeks, multiple exchange listings, the liquidity lock, and announcements that HIPP can now be spent as cash via Ivendpay, the project may dominate the meme coin sphere.
Many online analysts are now speculating whether or not El Hippo is undervalued and oversold.
As with anything in crypto, there are no guarantees, and as a small-cap coin, El Hippo is a high-risk investment with high levels of volatility. Even so, this volatility is why some investors are exploring HIPP.
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This article first appeared at crypto.news
