Liquidity Provider (LP)
DeFi
Participant supplying assets to a pool in exchange for fees.
Liquidity providers deposit tokens to enable swaps and earn fees. They receive LP tokens that track their share and can redeem them to withdraw underlying assets.
Frequently asked questions
How do LPs earn?
They receive a share of swap fees and sometimes additional incentives from protocols.What risks do LPs face?
Impermanent loss, smart contract risk, and volatile yields. Backtest and monitor performance.What should I track?
Pool depth, fee APR, volume, and your IL vs fees over time.