Exit Friction Models
mechanisms that slow, penalize, or disincentivize early withdrawal
Exit Friction Models are protocol-layer mechanisms designed to slow down or penalize capital withdrawal in order to reduce volatility, preserve liquidity, and promote long-term participation. These models create “soft locks” through timing constraints, fee structures, or progressive reward systems that make it economically irrational to exit early. Exit friction isn’t about restriction—it’s about realigning user behavior through well-placed disincentives and pacing.
Use Case: A staking platform includes a Cooldown Period of 7 days before assets can be withdrawn and applies a Protocol Withdrawal Fee if users exit before 30 days. Together, these exit friction models deter yield-hopping and preserve protocol stability.
Key Concepts:
- Cooldown Periods — Time delays that slow down unstaking or access to liquidity.
- Protocol Withdrawal Fees — Penalty fees applied to early exits or fast capital movement.
- Reset Penalty Systems — Users who leave lose all accrued loyalty or reward progress.
- Retention Pressure — Incentive pacing that encourages users to remain staked longer.
Summary: Exit Friction Models introduce calculated resistance to withdrawal. By making exit behavior less attractive, they stabilize token ecosystems, reduce mercenary cycling, and increase the quality and consistency of protocol participants.