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What are Liquidity Pool Tokens (LP Tokens)?
What are Liquidity Pool Tokens (LP Tokens)?

Learn more about how LP tokens work with Lofty's PMM

Max Ball avatar
Written by Max Ball
Updated over a week ago

In exchange for lending out your assets to the pool, you receive Liquidity Pool tokens (LP tokens).

Think of these LP tokens as receipts for your deposit into the liquidity pool, like when you deposit cash to a teller at a bank, they will return a receipt to show how much you’ve deposited. The pool uses these LP tokens as a record of how much funds it should return to you.

Each pool has its own unique set of LP tokens, mapping to the two unique assets of each pool.

Property token X →← LP tokens for property X

USDC for property token X pool →← LP tokens for USDC for property token X pool

This means for every liquidity pool, there are four unique set of tokens. The tokens of one pool cannot be used to interact with another liquidity pool.

Be sure to not lose your LP tokens. Otherwise, you won’t be able to reclaim your deposited assets and there is unfortunately nothing Lofty can do for you. You are not depositing assets with us, so we cannot return any assets back to you. Instead, you are depositing the assets to a smart contract (think of this as a vault that lives online and can store digital information). Lofty will have no way to reclaim your LP tokens should you lose them.

If you are using your Lofty wallet, your LP tokens will be sent to your Lofty Wallet.

If you are using an external wallet, your LP tokens will be sent to your External Wallet.

You can view the LP tokens under your wallet (if using Lofty wallet) under the "Wallets" dashboard.

Click "Lending" to view your LP tokens for various liquidity pools.

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