Locked liquidity. Renounced ownership. Burned tokens. If you have been around in the defi environment for a little while, especially in the memecoin space, you have undoubtedly heard these terms thrown around in various telegrams, discords, on twitter, or elsewhere. The terms themselves can be confusing to new and even experienced crypto traders, and finding information on them can be tricky. Worse, they can be used to mislead potential investors into investing in all sorts of scams. In response, Fuzzy Inu developed this guide to terminology. In this guide we discuss what each term means, while giving using FUZZY as an example of how to investigate a new contract.
This guide extensively relies on etherscan.io for contract tracing. It is not the only way to perform these checks, but it strikes a nice balance of comprehensive capability and ease of use.
Checking for locked (or burned) liquidity is one of the first things anyone should look for when checking out a new token. Locking liquidity is when a liquidity provider locks their share of liquidity into a liquidity pool for a set amount of time. Liquidity is necessary to make trades, so locking liquidity guarantees that trades can be made until the lock expires. It essentially means that the token cannot fall victim to a liquidity rug pull, which is one of the more common and simple scams.
To check for locked liquidity, start by heading over to the FUZZY contract page on etherscan by following this link. In general you can head to any contract page by entering the contract id into the etherscan search bar. Once on the contract page, you will want to navigate to the contract creator’s wallet. To do this, first click the “Tracker” link in the more info section. This takes you to a page that tracks transactions and holders, among other things.
We are looking for the contract creation transaction, which should be the very first transaction listed. Etherscan stores a maximum of 100,000 transactions, so for very large projects this method won’t work. But we aren’t interested in very large projects, we want to know if a new project is safe! So, while in the Transfers tab, navigate to the last page. There you will find a transaction that looks like this
This is the contract creation transfer. The green arrow points to the wallet where all of the initial tokens were sent. That is Josh (The Dev)’s wallet. Let’s see what the dev did with those tokens by clicking on his wallet (click fuzzydev.eth).
In the above image we can see that Josh created the contract and sent the entire supply to his wallet before transferring 93.1% of the tokens to a liquidity pool. But there is no locked liquidity transaction here (even though FUZZY's liquidity is locked). To understand why this does not show up, click on the Add Liquidity Txn Hash. Note that contract 0x12c4… is fuzzydev.eth.
Adding Liquidity involves a transfer of tokens into the pool in exchange for liquidity proof, or LP, tokens. Above, you can see that 931,000,000,000 FUZZY tokens were taken from the dev’s wallet in exchange for 1193 LP tokens. LP tokens are different from regular tokens, in that they are (generally) only used to pull liquidity out of the pool. When we talk about locking liquidity, we are talking about locking LP tokens. This means that locking liquidity does not involve a transfer of FUZZY tokens across Josh’s wallet, so it does not appear on this filtered list (which only includes transfers involving the FUZZY token). To check for locked liquidity click the wallet address under “Filtered by Token Holder”.
We are now looking at all of the transfers involving the owner’s wallet, and there it is, Lock LP Token. You may notice the "Approve" transaction between the time that liquidity was added and liquidity was locked; this is the liquidity provider allowing Uniswap to trade their LP tokens. You can also see the Set Max Tx Percentage where the transaction limit was removed and the Renounce Ownership call to ensure that ownership functions could no longer be used. But we will get to those in future sections. Back to Lock LP Token. Click on the Lock LP Token Txn Hash to reveal that all 1193 LP tokens were transferred out of the owner’s wallet. As of that point, the owner no longer has access to the liquidity pool, and cannot remove liquidity. This was done using Unicrypt.
Finally, for how long are the tokens locked? We can check that too. In the Lock LP Token Txn Hash screen, scroll down and click on Click to see More. Four new fields are revealed; we are interested in input data. Click on Decode Input Data.
The unlock date is shown in the table as a Unix Timestamp. To convert this to a human-readable datetime format, copy the value and head over to https://www.unixtimestamp.com/. Paste the value, click convert, and there you go! FUZZY’s liquidity unlocks on May 17, 2022. Until then the tokens cannot be touched, although other holders ARE able to add their own tokens to the liquidity pool. We will get to how that works in a future post.
And that's it! You now know how to check for locked liquidity and the liquidity unlock date. If you enjoyed this tutorial and would like to see more like it, or have suggestions for topics to cover in the future, join our Telegram, Discord, or follow us on Twitter. All the links to these socials can be found at the top of the page.