Understanding LP Tokens
How liquidity provider tokens work and what they represent.
How liquidity provider tokens work and what they represent.
LP (Liquidity Provider) tokens represent your share of a liquidity pool on a decentralized exchange. When you provide liquidity to a DEX like Aerodrome or Uniswap, you receive LP tokens in return.
LP tokens are receipt tokens that prove you contributed assets to a trading pool. They:
You deposit two tokens into a liquidity pool (e.g., WETH + USDC).
The DEX mints LP tokens representing your share of the pool.
As traders swap between the tokens, you earn a portion of trading fees proportional to your LP token balance.
Burn your LP tokens to withdraw your share of the pool (including earned fees).
When you deposit into Not Very Risky or Moderately Risky tiers:
You don't handle LP tokens directly—Metalos manages them on your behalf.
LP pools maintain a ~50/50 value ratio between the two assets. As prices change, the pool automatically rebalances to maintain this ratio.
Every trade in the pool generates fees (typically 0.01-0.3%). These fees are distributed proportionally to all LP token holders.
When asset prices diverge from your entry point, you may have less value than if you'd held the assets separately. This is called impermanent loss.
Learn more about IL in our Understanding Impermanent Loss guide.
Metalos uses the following LP tokens:
| Pool | LP Token Address | Components |
|---|---|---|
| WETH-USDC (Aerodrome) | 0xcdac0d6c6c59727a65f871236188350531885c43 | WETH + USDC |
| AERO-wstETH (Aerodrome) | 0x82a0c1a0d4ef0c0ca3cfda3ad1aa78309cc6139b | AERO + wstETH |
You can view these on BaseScan to verify pool composition and trading activity.