DeFi 10111 September 2021

Liquidity Provider Token (LP Token) Explained

LP Token

Summary

  • Liquidity provider tokens are crypto tokens given to DEX liquidity providers
  • PancakeSwap, Uniswap and Sushi offer LP tokens to liquidity providers
  • LP Tokens indicate the shares help in a liquidity pool

LP Tokens or liquidity provider tokens are crypto tokens given to DEX liquidity providers that run on AMM (Automated Market Maker) protocol. Some popular decentralized exchanges (DEXs) that offer LP tokens to liquidity providers include PancakeSwap Uniswap and Sushi.

Through LP tokens, it is possible to keep track of individual investor contributions to a liquidity pool. This is because LP tokens a user holds directly correspond to their share in a pool. LP tokens give the provider 100% control of their liquidity share.

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