LP token
A receipt token representing a provider's share of a liquidity pool. On TON it is implemented as a jetton — transferable, holdable, usable in farming or as collateral.
Aliases: liquidity pool token, provider token
LP token (liquidity provider token) is a receipt for a share in a liquidity pool. When a user deposits a pair of tokens into a pool on STON.fi or DeDust, the pool contract mints LP tokens proportional to the user’s share of total liquidity. Burning that LP token later redeems the share plus accrued fees.
Mint and redeem
On the first deposit a pool fixes an initial ratio, for example 1000 TON and 5000 USDT. If you add 10 TON and 50 USDT — 1% of reserves — you get 1% of the total LP supply. If the pool already has 10000 LP tokens outstanding, you receive 100 freshly minted tokens.
Fees earned by the pool are not distributed directly. They stay in reserves, growing the value backing each LP token. After a while, what was 10 TON and 50 USDT might redeem for 10.3 TON and 51.5 USDT, modulo impermanent loss from price drift.
To exit, you burn the LP token. The contract burns the matching share of supply and returns a proportional slice of both reserves.
On TON, an LP token is a jetton
TON implements LP tokens as standard jettons (TEP-74). That means:
- Each LP token has its own jetton-master contract.
- Every holder owns a jetton-wallet with a balance.
- It can be moved with the standard jetton transfer message.
- Any TON wallet shows it as a regular token.
- Any DeFi protocol that accepts arbitrary jettons can ingest it.
Unlike early Ethereum LPs that were ERC-20 by convention only, TON started with one consistent standard for both normal tokens and LP tokens.
LP tokens in farming
LP tokens are the building block of yield farming. The pattern looks like this:
- A user deposits into a TON/jUSDT pool and receives an LP token.
- They stake the LP token in a farm contract.
- The farm contract pays additional rewards in the protocol’s native token or a partner’s token.
Total yield breaks down as:
- swap fees from the underlying pool, accruing automatically inside the LP token;
- extra emissions for staking the LP token;
- sometimes third-party rewards layered on top.
To redeem TON and jUSDT, the user first unstakes the LP token from the farm, then burns it in the pool.
LP token as collateral
Because an LP token is a normal jetton, lending protocols on TON can accept it as collateral. Providers can hold a yielding pool position and borrow against it for additional leverage without leaving the pool. Risk parameters for LP collateral are tighter than for single assets: liquidators have a harder time parsing and selling LP tokens quickly, so LTVs are conservative.
Risks
An LP token inherits every pool risk: smart-contract bugs, impermanent loss, thin secondary liquidity. A separate trap is fake LP tokens: jettons with a similar ticker pointing to an empty contract may show up on a DEX listing. Always verify the jetton master address against the protocol’s official frontend before adding liquidity.