LP Token
A token representing a liquidity provider's share of a liquidity pool, redeemable for underlying assets plus earned fees.
In-Depth Explanation
When you deposit into a liquidity pool, you receive LP tokens proportional to your share. These tokens accrue value as trading fees accumulate. LP tokens are composable—use them as collateral, stake them for additional rewards, or deposit into vaults. When you withdraw, you burn LP tokens and receive your share of pool assets (subject to impermanent loss).
Related Terms
Liquidity Pool
LPA smart contract holding paired assets that enables trading, lending, or other DeFi activities.
Impermanent Loss
ILThe loss in value compared to simply holding assets, caused by providing liquidity to an AMM as prices diverge.
Automated Market Maker
AMMA smart contract that provides liquidity and enables trading using a mathematical formula instead of an order book.
More in DeFi Primitives
View all →Automated Market Maker
AMMA smart contract that provides liquidity and enables trading using a mathematical formula instead of an order book.
Liquidity Pool
LPA smart contract holding paired assets that enables trading, lending, or other DeFi activities.
Collateralized Debt Position
CDPA loan where users deposit collateral to mint or borrow assets, with liquidation risk if collateral value falls.
Lending Protocol
A DeFi application that matches lenders with borrowers through smart contracts, enabling permissionless borrowing and lending.