Liquidity Provider Tokens (LP Tokens)

Liquidity provider tokens, also commonly known as LP tokens are exclusively issued to the liquidity providers issued on a DEX. Oftentimes, they run on an AMM (automated market maker) protocol.

In order to track down a participant’s contribution to the overall liquidity pool, PL tokens are often issued to the user. The value of a single LP token can be calculated by dividing the total value of the liquidity pool by the total number of LP tokens in circulation. Like every other ERC-20 standard token, LP tokens are also available to transfer, stoke or trade with other protocols.