Liquidity Provider (LP) Token

A Liquidity Provider (LP) token is a receipt token issued to users who deposit assets into a liquidity pool on a decentralized exchange. LP tokens represent the holder's share of the pool and can be redeemed at any time for the underlying assets plus a proportional share of accumulated trading fees. LP tokens can also be used in other DeFi protocols for yield farming or as collateral, creating layers of composability.