The Role of LP Tokens

When you add liquidity to a Uniswap pool, you receive Liquidity Provider (LP) tokens. These tokens represent your share of the pool and automatically accumulate fees. They are ERC-20 tokens that can be moved, sold, or used in other DeFi protocols. Often, you can stake your LP tokens in yield farms to earn additional rewards on top of your trading fees. Understanding how to leverage these tokens is key. A thorough Uniswap Swaps guide often covers this secondary utility.

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