When people provide liquidity on decentralised exchanges or DEXs that operate on the automated market maker (AMM) protocols, they are usually issued separate tokens that represent their share of liquidity on the liquidity pools. These are called liquidity provider tokens or liquidity pool tokens, abbreviated as LP tokens.
Uniswap and SushiSwap are major DEXs on the Ethereum blockchain running such protocols, while there are others like PancakeSwap that run on the Binance Smart Chain network. Each of these DEXs issues LP tokens to their liquidity providers.
When considering their technical properties, LP tokens aren’t at all very different from most of the other tokens issued on the same network and usually take the form of ERC20 tokens (the most common type of utility tokens). Uniswap and Sushiswap, for example, both operate on top of the Ethereum network and issue LP tokens as ERC20 tokens. This then lets you transfer, trade and even stake them on other protocols, like you would any other type of token.
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