A user who deposits tokens into a liquidity pool to facilitate trading, earning a share of trading fees in return. LPs take on impermanent loss risk in exchange for fee income.
AMM
Liquidity Provider (LP)
Related terms in AMM
Automated Market Maker (AMM)
A smart contract that holds token reserves and enables trading without an order book. Prices are determined al...
Constant Product Formula
The pricing invariant x * y = k, where x and y are token reserves and k is a constant. When one token is bough...
Liquidity Pool
A smart contract holding paired token reserves that enables trading. Liquidity providers deposit equal value o...
LP Token
A token minted to liquidity providers representing their share of a pool. LP tokens can be burned to withdraw ...