Pool Tokens

Depositing liquidity into a pool results in the minting of unique tokens, known as liquidity tokens, which are sent to the provider's address. These tokens signify the provider's share in the pool. The amount of liquidity provided dictates the number of liquidity tokens received. For a new pool, the initial number of liquidity tokens will be equal to sqrt(x * y), where x and y are the amounts of each token provided. A 0.3% fee is levied on trades, paid by the transaction sender. This fee is then distributed pro-rata to all LPs in the pool after the trade. To withdraw their original liquidity plus any accrued fees, liquidity providers must "burn" their liquidity tokens, exchanging them for their share of the pool's liquidity and the proportional fee. Liquidity tokens, being tradable assets themselves, allow liquidity providers the freedom to sell, transfer, or utilize them as they wish.