LP Token
A receipt token proving your share of a liquidity pool — redeemable for your deposit plus accrued fees, and usable elsewhere in DeFi.
When you deposit into a liquidity pool, the protocol mints an LP token recording your proportional claim. Burn it later to withdraw your underlying assets plus your accumulated share of trading fees.
Because LP tokens are themselves transferable tokens, they became composable DeFi building blocks: you can stake them for extra rewards (yield farming), use them as collateral, or deposit them into a vault. That composability multiplies both yield and risk — each layer stacks another smart contract that could fail, so a farmed LP position is only as safe as its weakest contract.