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What Is the Economic Role of a Decentralized Exchange’s Native Token in the LP Process?

The native token is used for liquidity mining rewards to bootstrap liquidity and can also grant governance rights or a share of protocol revenue.
Greeks.Live16.11.25

What Is the Economic Role of a Decentralized Exchange’s Native Token in the LP Process?

The native token of a decentralized exchange (DEX) often serves as an incentive mechanism to attract liquidity. LPs are rewarded with the native token in addition to trading fees, a process known as liquidity mining.

This token can also grant governance rights or be used for staking to earn a share of protocol revenue. Its economic role is to bootstrap liquidity and align the long-term incentives of LPs with the protocol's success.

What Is a ‘MEV-Share’ Protocol and How Does It Redistribute MEV?
How Does the “Expectation of Profit” Element Relate to Token Governance Rights?
What Is the ‘Selfish Mining’ Attack Vector in a PoW System?
How Does a Protocol’s Treasury Fund Staking Rewards?

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