Envelop Case 1. Locked Liquidity
More and more users are using decentralized finance (DeFi) applications. And the most common are swap applications, automated market makers based on liquidity pools.
It happens that pools are vulnerable to attacks, one of which is rug pull (RP) and others like it.
Rug-pull is a fraud scheme where anonymous founders trick people into investing money for a cryptocurrency project which is then abandoned.
There are different ways of defense to avoid RP, but the simplest and therefore most reliable is to lock liquidity.
Let's do that right now. In our example we'll use the Thruster DEX in the Blast chain, but it is also applicable to Arbitrum, Ethereum, BNB Smartchain, Polygon.
Create locked liquidity pool
Select a pair and create a liquidity pool.
Check the position in the blockexplorer.
Here we see a non-fungible token of ERC-721 standard, through which our liquidity position is tokenized. If you use another DEX and your position is tokenized through the ERC-20 token, then don't worry, the lock-in mechanism described here fits any token.
Our position in the Thruster is an NFT
Lock LP position
Go to Envelop NFT dashboard
Select your LP-NFT and you can see more info
Click the “Wrap” button
Scroll the page and set a time lock. We have specified a lock time of 1000 days, until summer 2027, but you can choose any that fits your strategy.
Once the transaction is confirmed, you will receive a wrapped NFT with locked liquidity for the duration of the lock. This wNFT is liquid, you can gift it, transfer it to another wallet or sell it, but you will not be able to unwrap and withdraw the liquidity until the end of the locking time.
Your wNFT will appear on the dashboard in the related tab.
You'll see more details in the wNFT page.
Advantages of locking liquidity through wNFTs
Such wrapped wNFTs provide a number of unique opportunities:
- Sell wNFTs with locked-in liquidity in the secondary market;
- Create indices from pools of liquidity;
- Use the wNFT as a DAOs’ treasure of adding fees or contributions to it
- Use in multi-signature wallets
- Non-custodial solution
