Liquidity Provider (LP) tokens are given to users who add their crypto assets to a liquidity pool on decentralized exchanges (DEXs) like Uniswap or SushiSwap. These tokens represent your share of that pool and act as proof that you’ve contributed funds. As long as you hold the LP tokens, you can withdraw your share at any time.
LP tokens are more than just receipts — they can be used to earn rewards from trading fees, staked in other DeFi protocols for extra income, or even qualify you for special events like token launches. They’ve become an essential tool in decentralized finance, helping exchanges run smoothly while allowing users to earn passive income from their crypto.
