Glossary
LP Token
A token issued to a liquidity provider as a receipt for depositing assets into a pool, representing their proportional share of the reserves and accrued fees.
An LP token (liquidity provider token) is minted when you deposit assets into an AMM pool. It is a claim ticket: burn it later to withdraw your share of the reserves plus the swap fees that accumulated while you were in. Because the token tracks a share of the pool rather than a fixed amount, its redeemable value drifts with the pool's balances and exposes you to impermanent loss.
LP tokens are composable. They can be staked in gauges for extra emissions, deposited as collateral in lending markets, or wrapped by vaults that auto-compound rewards. Standard pools issue fungible ERC-20 LP tokens, while concentrated-liquidity designs like Uniswap v3 issue position-specific ERC-721 NFTs instead.