What Is the Purpose of the ‘LP Token’ Received by a Liquidity Provider?
The LP token, or Liquidity Provider token, serves as a receipt and proof of ownership for the LPs deposited assets in the liquidity pool. It represents the LP's proportional share of the total pool and the accumulated trading fees.
These tokens are essential for withdrawing the original capital and earned fees. Furthermore, they are often used in 'yield farming' as collateral or for staking in other DeFi protocols.
