LP token
liquidity provider token
A receipt token representing a share of an AMM liquidity pool — claims a pro-rata fraction of pool reserves.
LP tokens are themselves used as collateral, deposited into yield aggregators, or staked for emissions. Their value tracks pool reserves + accrued fees, which means Impermanent loss gets baked into the LP token price.
Related terms
- Liquidity poolA pool of token reserves that a smart contract uses to facilitate swaps, lending, or other on-chain activity.
- AMM (automated market maker)A smart contract that prices assets via a pricing curve over a pool of reserves rather than an order book.
- Impermanent lossThe opportunity cost an LP incurs when pool composition rebalances toward the underperforming asset.