What is LP staking?

LP Staking is the process by which you transfer your tokens to Decentralised Exchanges (DEX) to provide liquidity on the market in exchange for rewards in the form of new tokens.

In simple words โ€” you โ€œdepositโ€ your tokens and receive rewards on top of them.

For automated market makers (AMMs) such as Uniswap, Curve and Balancer to work, crypto-liquid asset providers must contribute to crypto liquidity pool.

When tokens are stored in a crypto liquidity pool, the platform automatically generates a new token representing the portion owned by the depositor in that liquidity.

This is called a liquidity provider (LP) token and can be used for many functions within the native platform and other decentralized finance (DeFi) applications.

This results in an increase in available liquidity in the DeFi ecosystem.

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