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Glossary · L
Liquidity Provider
A user who deposits tokens into a DeFi liquidity pool or lending market to provide capital for trading or borrowing. In AMMs, LPs deposit token pairs (e.g., ETH and USDC) into a pool and earn trading fees in return. In lending protocols, LPs (suppliers) deposit single assets and earn interest from borrowers. LPs take on risks including impermanent loss (for AMMs), smart contract risk, and counterparty risk (for lending).
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