What Is LP Tokens (Liquidity Provider Tokens)?
Definition
LP tokens represent your share of a liquidity pool. They can be redeemed to withdraw your deposited assets or burned to permanently lock the liquidity.
When you add liquidity to a decentralized exchange pool, you receive LP (Liquidity Provider) tokens in return. These tokens are proof of your deposit — they represent your proportional share of the pool's reserves.
- Redeemed: Exchange them back for your share of the pool's tokens (plus accumulated fees)
- Burned: Permanently destroy them, which locks the underlying liquidity forever — no one can ever withdraw those tokens from the pool
- Staked: Some protocols offer yield farming rewards for staking LP tokens
Burning LP tokens is a common trust-building tactic for new token launches. When liquidity is permanently locked, buyers know the creator can't "pull the rug" by removing all liquidity and crashing the price.
CoinDevTools provides tools to both add and remove liquidity, as well as burn LP tokens on Solana (Raydium), Ethereum (Uniswap v2), and Base.
Related Terms
Liquidity Pool
A liquidity pool is a pair of tokens locked in a smart contract that enables decentralized trading on automated market makers (AMMs) like Raydium and Uniswap.
Impermanent Loss
Impermanent loss is the difference in value between holding tokens in a liquidity pool versus simply holding them in your wallet, caused by price divergence between the paired assets.
Raydium
Raydium is the largest automated market maker (AMM) and liquidity protocol on Solana, supporting both CPMM and legacy AmmV4 pool types.