Liquidity Provider and LP Token
Entities supplying assets to DeFi pools for trading, receiving LP tokens as receipts for proportional rewards.
What is Liquidity Provider and LP Token?
Liquidity Providers (LPs) deposit equal-value token pairs into Automated Market Makers (AMMs) like Uniswap, enabling swaps and earning 0.3% fees—e.g., $10 billion daily volume yields $30 million rewards. LPs’ risks include smart contract hacks ($3 billion lost 2020-2024).
LP Tokens represent shares, redeemable for principal plus fees, with 50% of DeFi TVL from LPs in 2025. Tokens act as collateral for lending or staking, but impermanent loss erodes value if prices diverge—e.g., 5% ETH-USDC imbalance costs 2%.
Related Terms
UAE Stablecoin Regulation
UAE's Central Bank regulations restricting stablecoin use to licensed AED-pegged payment tokens, effective from 2025.
Semantic Payment Metadata
Structured data describing payment terms for machine processing.
Solana (SOL)
A high-performance Layer-1 blockchain platform enabling fast, low-cost transactions for decentralized applications and digital assets using proof-of-history and proof-of-stake consensus.
Rug Pull
A scam in the digital asset space where developers or promoters of a project abandon it after raising funds, leaving investors with worthless tokens or assets.
Stablecoins on Ethereum
Digital assets pegged to fiat currencies like USD, issued on Ethereum for stable value transfer, DeFi collateral, and global payments.
Stop Order
An order that triggers a market order when an asset reaches a specified stop price to manage risk.