What assets can be locked up?

Assets that can be locked up span various financial spheres and mechanisms. Here are some examples drawn from expert discussions across different contexts:

1. Cryptographic Bridges:

   • In the context of blockchain and cryptographic bridges, assets like Ethereum (ETH) can be locked up on one layer (e.g., Layer 1) and unlocked on another (e.g., Layer 2). This ensures assets like ETH are secured during transfers between different blockchain layers or chains 1.

2. Commitment Devices:

   • Savings accounts with restrictions, known as commitment accounts, allow individuals to lock up their funds until a predetermined goal or date is reached. This approach has led to significant increases in savings rates among users 2.

3. Venture Capital and Private Equity:

   • Venture and private equity funds typically involve locking up capital for extended periods, often several years. This means that while the capital is immobilized to meet investment goals, the investors can potentially gain liquidity through secondary market transactions without impacting the capital's locked status 3.
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       1

       Unpacking Cryptographic Bridges

       00:06:22
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       2

       Commitment Devices Explained

       00:35:29
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       3

       Liquidity and Tokens

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       4

       Ether's State of Matter

       00:14:47
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       5

       Illiquid Assets

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4. DeFi and Staking:

   • In decentralized finance (DeFi), assets are often locked as collateral in smart contracts, such as those in MakerDAO. This process effectively "freezes" the assets, preventing their use in the secondary market until certain conditions are met or loans are repaid 4.

5. Alternative Investments:

   • Alternative investments like direct investment in startups or illiquid funds often require the capital to be locked up. This forces investors to maintain their thesis and avoid impulsive selling, typically leading to potentially higher returns 5.

Overall, locked-up assets serve various purposes, such as securing transactions, enforcing financial discipline, or ensuring commitment to investment theses, often with a trade-off between liquidity and potential returns.