TOKENS & ASSETS
LP Token (Liquidity Provider Token)
Definition
LP tokens are issued to liquidity providers as proof of their contribution to a liquidity pool. These tokens represent the provider's share of the pool and can be redeemed for the underlying assets plus earned fees.
Example
Example
When you provide ETH and USDC to a Uniswap pool, you receive ETH-USDC LP tokens that represent your stake in the pool.
Risks to Consider
Risks
- Impermanent loss
- Smart contract risk
- Pool-specific risks
