LP Token
Also known as: Liquidity Receipt Token, AMM Share Token, DeFi Pool Token
A token received by liquidity providers representing their share in a DeFi liquidity pool and used to claim rewards.
An LP (Liquidity Provider) token is issued to users who deposit token pairs into DeFi liquidity pools. It acts as a receipt and represents the user's proportional ownership of the pool’s assets and fees. LP tokens can often be staked or used in other DeFi protocols for additional rewards, making them a key component of yield farming strategies. Their value fluctuates with pool activity and impermanent loss. Users redeem LP tokens to withdraw their share of the pool, including accrued trading fees. They are commonly found in platforms like Uniswap, Curve, and Balancer.