Liquidity Provider (LP)

A Liquidity Provider (LP) is someone who adds funds to a liquidity pool of a Decentralised Finance (DeFi) protocol, such as an Automated Market Maker (AMM), that traders can trade against. Users that fund the pool, usually need to provide funding of 2 different assets to enable traders to trade between both assets. The LP is rewarded for providing liquidity and being a trade facilitator, earning the fees from the transactions that take place in their pool.

The rewards a LP earns is based on the percentage of the liquidity pool a user provides.  

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