BinaryX has rebranded to Four, uniting GameFi, IGOs, and MemeFi under one ecosystem. With BNX now FORM, Four continues to innovate in blockchain gaming."

Having launched in May 2021, BinaryX, which started out as a 

 (DeFi) platform, has continued to evolve and adapt to the rapidly changing blockchain landscape. However, in the spirit of adaptability and innovation, the platform switched to 

, focusing its attention on play-to-earn (P2E) games.

As a GameFi platform, BinaryX has also created an 

 (IGO) launchpad from which developers can launch GameFi projects.

Now, BinaryX has rebranded to Four in order to align with the mission of its 

 product, a launch platform for the meme coin ecosystem.

Let's learn more about BinaryX and the way it continues to shape the crypto market with innovative products and adaptable business models.

 hub for the development of GameFi projects, includes an IGO launchpad to facilitate developers in launching games. 

BinaryX began in 2021 as a decentralized derivative trading system that featured the use of 

. But in 2022, the BinaryX team gradually evolved its project into a GameFi platform in order to adapt to the increased demand for P2E games. Its aim is to make web3 games more accessible and approachable to the vast community of gamers.

BinaryX also developed an IGO launchpad to serve as a comprehensive hub for gaming developers to launch their GameFi projects, and for investors to receive early access to promising new play-to-earn games. Furthermore, the BinaryX team announced the incorporation of a 

 (DAO) into its GameFi ecosystem so that its community of token holders could participate in voting on governance matters.

In February 2025, BinaryX rebranded to Four in order to align with its latest product, Four.meme, which was launched in July 2024. Following the rebrand, its native token, BNX, would now become FORM to reflect the project's commitment to innovation and adaptability.

As one of the top web3 platforms on BNB Chain, BinaryX has continued to innovate and experiment with different business models to adapt to the blockchain landscape's fast-paced nature. To this end, BinaryX has the following diverse products under its wing.

BinaryX launched its Initial Game Offering (IGO) launchpad in May 2022 as a dedicated platform to support blockchain gaming projects. The launchpad helps game developers secure funding for decentralized video games. They also get a platform on which to build communities and accelerate their web3 game development.

By leveraging BinaryX’s expertise in GameFi and its existing user base, projects gain exposure to a vast community of crypto gamers. The platform offers early access to promising blockchain games, allowing investors to participate in token sales and 

 presales. BNX holders can use their tokens to vote for games' listings on the BinaryX platform, and they also receive rewards, such as game tokens and NFT 

Some notable games launched on the BinaryX IGO launchpad include 

. These games showcase BinaryX’s commitment to innovation in GameFi, integrating play-to-earn mechanics, NFTs and decentralized governance to help create immersive gaming ecosystems.

BinaryX's GameFi trading platform is a marketplace designed for seamlessly trading blockchain gaming assets, including NFTs, in-game tokens and virtual items. Launched to support the growing GameFi ecosystem, the platform enables gamers and investors to buy, sell, trade and auction assets from BinaryX-powered games in a secure and efficient manner.

 and DeFi principles, BinaryX ensures transparent transactions with minimal fees, and enhances liquidity for in-game assets while empowering players to maximize their earnings.

The BinaryX GameFi trading platform supports transactions involving 

In January 2022, BinaryX launched the BinaryX DAO, a first for a GameFi project, through which BNX token holders can participate in the project's community governance, determine airdrop and dividend ratios, and submit proposals on how to improve the BinaryX ecosystem.

Case in point: BinaryX's community participated in voting for/against the platform's rebranding to Four during a community vote that was held from Sep 21–23, 2024.

The BinaryX Treasury serves as the financial backbone of the BinaryX ecosystem, supporting the development and sustainability of its GameFi projects. Some sources of assets used to fund the treasury include initial capital injection by the BNX team, income from gaming activities, income from the IGO launchpad and profit from external investment.

Profits in the BinaryX Treasury are used to reward BNX stakers, incentivize BinaryX sidechain node providers and finance strategic investments in third-party projects.

BNX is the native token for the BinaryX platform. Its original maximum supply of 2.1 billion tokens was adjusted to 580 million after a community vote in late July 2024.

Distribution of the 580 million BNX tokens is as follows:

Following BinaryX's rebranding to Four, BNX will change to FORM, and holders will be allowed to exchange to the new token at a ratio of 1:1 (details to follow at a later date).

BinaryX has integrated a multi-token model. Apart from BNX, the other two tokens associated with the platform are as follows:

BinaryX officially rebranded to Four on Feb 21, 2025, following an overwhelming vote via its DAO, marking a significant transformation in its vision for GameFi and DeFi innovation. This shift comes with a revamped website, which will serve as a hub for the GameFi platform, IGO launchpad and Four.meme, a new addition to Four’s expanding ecosystem.

Following the rebranding, a 1:1 token migration from BNX to FORM is necessary in order to enhance the token's identity and align with the project's new direction. FORM remains on the BNB Chain, ensuring smooth compatibility with existing infrastructure.

 (CEXs) won’t need to do anything — the token swap to FORM will take place automatically. BinaryX will liaise with these exchanges to switch from the BNX contract address to the one for FORM.

 (DEXs), cold wallets and self-custody wallets will need to carry out a manual token swap based on a converter provided by BinaryX. To carry out this token swap, you’ll need to do the following:

 landing page (link will be provided at a later date).

4. Sign to authenticate your transaction to receive the FORM tokens.

5. Add the new FORM contract address into your wallet to see the new tokens.

You can buy BNX as a USDT Perpetual contract (

) on the Bybit trading platform. However, the BNXUSDT contract will be delisted on Mar 17, 2025, 9AM UTC, so make sure to close your open positions and cancel your active orders for BNXUSDT as soon as possible.

Over the years, BinaryX has consistently demonstrated strong performance. The rebranding of BinaryX to Four marks a bold step forward in its mission to impact the web3 space. This transformation reflects the project’s commitment to expanding its ecosystem, enhancing token identity and integrating innovative elements, such as Four.meme, alongside its GameFi platform and IGO launchpad.

By adapting to the evolving crypto landscape, Four is positioning itself as a comprehensive hub for web3 and gaming enthusiasts so that it can offer a seamless experience for gamers, investors and meme culture participants. The introduction of the FORM token ensures a more cohesive and recognizable branding, reinforcing Four’s long-term vision. Thanks to the smooth migration process from BNX to FORM, users can continue participating in the ecosystem while benefiting from enhanced liquidity and utility.

Four remains dedicated to GameFi innovation, supporting successful blockchain games such as 

, all of which feature play-to-earn mechanics, NFTs and decentralized governance. The revamped platform is designed to foster a dynamic gaming economy, support new game launches and provide a secure environment for trading digital assets. With its rebranding and expanded offerings, Four is set to lead the next wave of blockchain gaming and DeFi innovation, uniting gamers, developers and investors in a vibrant web3 ecosystem.

Intermediate

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From BinaryX to Four: A unified hub for GameFi, IGOs and MemeFi

Learn about the benefits of using Bybit Pay and the step-by-step instructions to get started with Bybit Pay now.

Traditional financial systems and blockchain-based ecosystems have long operated in silos, creating friction for users and businesses alike. 

 is a new payment solution that’s been designed from the ground up to solve this issue to make cryptocurrency transactions seamless for any users.

With the aim of mainstreaming crypto payment options, Bybit Pay has already begun partnering with traditional payment solution providers, enabling users to transact with cryptocurrencies through existing infrastructure. For example, with its recent 

, Brazilian users can now shop by using cryptocurrencies in a quick and effortless manner. 

In this article, we’ll explain the benefits of using Bybit Pay and provide step-by-step instructions for new users who want to get started with the platform.

With more than 60 million users on the Bybit platform, Bybit Pay empowers merchants with access to the global network of its vast user base. Meanwhile, users benefit from a seamless integration with web3 wallets that makes paying with crypto as easy as paying with fiat currency. The platform also offers collateralized payment tools that allow users to borrow against their NFT and crypto holdings. 

Through these innovative features, Bybit Pay blends the ease of traditional finance with the flexibility of cryptocurrencies, creating an ecosystem that benefits both users and merchants.

Bybit Pay can be accessed using the Bybit App on mobile and desktop. 

While filling in the form, make sure that the information you enter matches the information you’ve already provided during 

: As of now, only verified users in Brazil can make transactions using a Pix QR code.

Since the Pix integration, Brazilian users can use Bybit Pay wherever Pix is accepted. This opens up a vast network of offline establishments in the country, since Pix is Brazil’s leading instant payment system provider. 

In addition to offline establishments, Bybit Pay can also be used with a number of e-commerce providers for online shopping using cryptocurrencies. Bybit Pay will be available to users from other regions soon.

With the launch of Bybit Pay, Bybit is integrating crypto payments with traditional payment services providers — and vastly expanding the number of places where cryptocurrencies can be used.

Beginner

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How to use Bybit Pay for effortless payments

SwapX (SWPX) is a Sonic-based DEX offering concentrated liquidity, automated liquidity management and modular plugins for seamless DeFi trading.

In mid-February 2025, Argentina's President Javier Milei posted a tweet promoting a previously poorly known cryptocurrency, 

 (SOL)–based Libra (LIBRA), triggering a huge price surge from fractions of a cent to over $5 within hours of the tweet. The token's creators, who controlled 70% of the supply, quickly sold their holdings at the peak, causing the price to plummet to less than $1 within hours. Approximately five hours after his initial post, Milei deleted his post, distancing himself from the project as 

The LIBRA token debacle further tarnished Solana's reputation, already undermined by the numerous dubious meme coins on Solana, exacerbating SOL's decline. US president Donald Trump's announcement about including SOL in the proposed US strategic crypto reserve assets list helped soften the decline, but the damage had already been done.

Against the backdrop of Solana’s reputational troubles, developers and 

 (DApp) operators are actively searching for alternatives — and many are turning to 

 (S), the rebranded reincarnation of Fantom (FTM), as a chain that also features great performance and cost advantages, while also being 

 (EVM)–compatible and, importantly, largely free from the image of a scam nest.

Among the many DApps embracing Sonic is SwapX (SWPX), a 

 (DEX) that offers a number of innovative features, including concentrated liquidity (CL) provision, modular plugins for additional functionality, automated liquidity management, user-friendly account abstraction and more.

 (SWPX) is a DEX platform built on the Sonic Layer 1 blockchain, which aims to provide efficient, user-friendly and flexible trading solutions for crypto token traders and liquidity providers. 

SwapX takes advantage of Sonic's speed and cost advantages to offer cheaper transactions and nearly immediate settlement, both of which are important considerations for DEX users.

The SwapX project has implemented several features and services to address the needs of 

 and liquidity providers at all expertise levels.

SwapX's execution engine is powered by Algebra Integral, a 

 (DeFi) technology provider offering a suite of 

 (AMM) solutions. The SwapX DEX has integrated Algebra Integral's V4 engine, a modular architecture that lets exchanges use customizable plugins for additional functionality. SwapX's plugins support modular upgrades and extend the platform's capabilities by adding new services without disrupting core operations.

 (UNI) v3–style CL pools, which let liquidity providers contribute their funds within specific price ranges. The platform also features automated liquidity management (ALM), so users can add a single token to liquidity pools (instead of having to deposit a pair of tokens). It also removes the need for liquidity providers to actively monitor their positions.

SwapX prides itself on its robust operations, which ensures overall security by restricting plugins from handling user funds directly, thus minimizing the risk of potential vulnerabilities. The platform also uses thoroughly audited, verified 

Another innovative feature of SwapX is account abstraction (AA), which simplifies user authentication by allowing access via an email or Google account. Instead of relying solely on 

, AA uses smart contracts to manage accounts, which further enhances security.

The SwapX project is unrelated to the earlier (and, by now, largely defunct) BSCEX AMM aggregator platform, which was sometimes referred to as BSCEX SwapX.

SwapX's choice of the Sonic blockchain isn’t incidental. The 

 chain has been gaining popularity over the past few months, thanks to its stellar technical properties, low transaction costs and scam-free reputation.

Sonic, a rebranding of an earlier popular blockchain Fantom (FTM), launched its mainnet in December 2024. The Sonic chain boasts a throughput capacity of up to 10,000 

 and sub-second finality times. Unlike Solana, Sonic is also EVM-compatible.

In February 2025, DeFi activity on Sonic began to rise, with some of the new activity supported by Solana's difficulties and the search for a less controversy-affected hosting platform.

Supported by the broader shift from Solana to Sonic, some Sonic-based DeFi protocols — such as Shadow (SHADOW), Metropolis (METRO) and SwapX itself — saw their token prices surge around mid-February. However, by early March, many of the tokens were off the highs to which they’d quickly climbed.

We noted above that plugins are one of SwapX's core features, allowing it to extend the basic AMM functionality. YieldSync is probably the most important of these plugins.

The plugin, created jointly by SwapX and Algebra Integral's developer, enhances liquidity pools containing yield-bearing assets like 

 (LSTs) and liquid restaking tokens (LRTs). It redirects part of these tokens' yield into incentives that encourage voting within the platform's governance system. 

This process increases the overall rewards for liquidity providers and makes the pools more attractive, which draws in more liquidity and boosts the pools' efficiency.

CL, another key feature of SwapX, allows liquidity providers to contribute their funds within specific price ranges to optimize the use of their liquidity. First introduced by Uniswap v3, the CL model can deliver greater returns and lead to more efficient capital usage than the standard AMM setup, whereby the contributed liquidity is spread over the entire price range in the pool.

It should also be noted that while CL-based liquidity provision can be highly profitable, it requires active management and is more complex than the standard AMM model.

SwapX features four distinct liquidity pool types 

 Classic Volatile AMM, Classic Stable AMM, CLAMM and single-token pools offered in partnership with the ICHI liquidity strategies provider.

Earlier on, we mentioned SwapX's ALM functionality, which is leveraged by the ICHI pools. In essence, SwapX's ALM helps liquidity providers in CL pools automate the process of adjusting liquidity within specific price ranges. This reduces the need for constant monitoring and manual adjustments, one of the core drawbacks of the standard CL model. ALM aims to maximize yields by keeping liquidity active within profitable price ranges. In other words, SwapX's ALM might be described as an "auto-pilot" mode for concentrated liquidity provision.

 asset issued on the Sonic chain. Its primary function is to facilitate 

 voting on the platform. Holders of SWPX can lock their funds and be issued veSWPX, an NFT asset that grants the rights to participate in on-chain votes, and attain voting power alongside farming rewards. In addition, veSWPX qualifies you to receive weekly rewards from swap fees and voting incentives. Eligible users can also receive the token via 

SWPX has a max supply of 123 million and a total supply of over 58 million, of which around 14.44 million are in circulation. The token's maximum supply limitation is 123 million. As of Mar 14, 2025, the token is trading at $0.30 and has a market cap of $4.44 million, according to data from CoinGecko.

SwapX is among the newer DeFi platforms taking advantage of the Sonic blockchain's recent popularity, technical efficiencies and low costs. With an array of options for traders at all levels of expertise, SwapX has solid potential to become a significant player, at least within the Sonic ecosystem. 

Whether you want basic token swaps and liquidity provision, or prefer to utilize more advanced strategies, such as CL-based liquidity provision and ALM, SwapX has something to offer you.

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SwapX (SWPX): The future of liquidity provision on Sonic

Indices are essentially statistical measures that track the performance of a group of assets. Learn more here.

From the Dow Jones Industrial Average (DJIA, or simply the Dow) to the Hang Seng Index (HSI), the world’s major stock market indices are vital benchmarks that reflect the performance of leading companies across regions. For beginning and veteran traders alike, such indices act as overarching market bellwethers that provide deeper insights into market trends and serve as tools for trading strategies, risk management and portfolio diversification.

Given their mass popularity, indices are widely traded in the forms of futures, options and 

 (ETFs), enabling traders to effortlessly hedge against volatility or speculate on market movements through their preferred instrument. In this article, we’ll explore the world’s biggest market benchmarks, their composition, significance in trading and their role in shaping global financial markets.

Indices are essentially statistical measures that track the performance of a group of assets. For example, by referring to the three major US indices, we can immediately tell how a particular segment of the market is performing, thanks to the snapshot provided by these indices. 

At their core, these indices provide a way to gauge market trends, manage risk and diversify portfolios by offering a broad view of different sectors or asset classes. They’re widely used in financial markets for investment strategies, and as benchmarks for evaluating performance.

While more popular indices typically track the prices of stocks, traders may also consider trading indices that take into account the performance of other asset types, such as commodities and fixed-income instruments (e.g., bonds).

How indices work — mechanics, composition and weightage

Beyond simple tracking, indices also serve as the basis for numerous financial products that enable traders to participate in broad market movements without needing to purchase individual assets. This unmatched level of accessibility makes indices crucial for both institutional and retail traders. To go one step further, the construction of an index — including the specific assets being included, and their weighting — can significantly impact the index’s behavior, and the extent to which it effectively represents its target market.

Overall, understanding these construction methodologies is vital for traders who want to accurately interpret index movements and make informed decisions. We’ll go into more detail on the inner workings of index trading in the subsequent sections of this article.

Index trading involves speculating on the price movements of a group of assets without directly owning them. This is typically achieved through financial instruments, such as contracts for difference (CFDs), futures or options. The following section provides a detailed explanation of the mechanics involved.

As previously mentioned, indices are composed of various assets, such as stocks, commodities or bonds, and their performance is tracked using different weighting methods. The most common methods include the following.

Now that you’re familiar with the technicalities involved with index composition, let’s dive deeper into the instruments involved with the trading of indices.

New to trading indices? No worries. Here’s a quick four-step process to help you get started.

In summary, index trading provides a way to participate in broad market movements through various financial instruments. It offers diversification and flexibility but requires careful 

, given the volatility associated with index trading.

Trading indices offers several compelling advantages that make them an attractive option for both novice and experienced traders. The following reasons are worth considering.

Indices can be categorized based on their coverage, weighting method and focus. 

Following are some of the main types of indices.

Index prices are influenced by a variety of factors that can be broadly categorized into economic indicators, company performance, market sentiment and external events. These factors interact dynamically, influencing the overall performance of indices and shaping market trends.

For traders looking to get started with index trading, 

 with deep liquidity and competitive spreads. For a limited time (from Mar 13 through Apr 12, 2025), we’re running a 

 in which traders can enjoy zero fees on selected index pairs, making it even more cost-effective to explore index trading.

Ultimately, trading indices can seem daunting, given their depth of assets and the mechanics involved. For example, the S&P 500 comprises hundreds of stocks, each with different amounts of weightage. If mega-cap stocks like Tesla were to face some form of volatility, there would definitely be an impact on the index. As such, beginning traders who are new to index trading must 

 prior to transacting with indices, given the risks involved with the use of leveraged instruments.

For those with a longer time horizon in mind, trading indices can certainly be useful, especially if you’re intending to 

 your entries over time when building up your position. Given the extent of diversification involved and the sheer amount of liquidity present, it certainly would make sense for any trader with a long-term bullish inclination to trade indices and hold their ETFs for the long haul.

With a reliable platform like Bybit Gold&FX, you’ll practically be spoiled for choice when it comes to navigating the diverse world of indices and other financial instruments. By empowering traders with access to real-time data, advanced charting tools and a user-friendly interface, Bybit Gold&FX helps traders make informed decisions when analyzing market trends and execute trades with precision.

Whether you're interested in tracking the performance of major stock market indices, exploring commodity indices or diversifying your portfolio with forex and gold, Bybit Gold&FX offers the necessary resources and support. The platform's focus on security and transparency provides traders with peace of mind, allowing them to concentrate on their investment strategies and capitalize on market opportunities. In essence, it transforms the complexities of index trading into an accessible and sleek experience.

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Indices: Trading the world’s biggest market benchmarks

DeFi

web3

Liquidity provider (LP) tokens ) are tokens automatically generated by a DEX and issued to a liquidity provider once they contribute assets to a liquidity pool.

amm-liquidity-pool.png

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You might have heard the buzzwords ‘’yield farming‘’ or “staking for yield.’’ Indeed, they’re popular terms used in the 

e (DeFi) ecosystem, which birthed the concept of 

(AMMs). These protocols rely on liquidity providers to contribute their assets into a pool to facilitate transactions. Once you become a liquidity provider, you’re issued liquidity provider (LP) tokens.

What are LP tokens? What role do they play in DeFi? Are they risky?

Liquidity provider (LP) tokens (at times called liquidity pool tokens) are tokens automatically generated by a DEX and issued to a liquidity provider once they contribute assets to a liquidity pool.

 These tokens represent one’s share of the fees earned by the liquidity pool.

A simple formula to calculate the value of a liquidity provider token is as shown:

Total Value of Liquidity Pool / Circulating Supply of LP Tokens = Value of LP Token

LP tokens give you full custody of your locked assets. Most DEXs allow you to withdraw them at any time and redeem the interest earned.

Technically, LP tokens are pretty much the same as other tokens supported by a blockchain network. For example, an LP token issued on Uniswap, which runs on the 

. With an ERC-20 token, you can stake, swap or trade Uniswap LP tokens on any Ethereum-based protocol.

Depending on the DeFi platform, LP tokens may be called by different terms, but they usually contain the names of the two crypto trading pairs they represent. 

, the LP tokens are known as Balancer Pool Tokens (BPT). On 

, they’re called Sushiswap Liquidity Provider (SLP) tokens. If you’re providing liquidity on SushiSwap for people to swap between ETH and 

, your LP tokens will be USDC/ETH SLP tokens.

LP tokens are essential to the smooth operation of a DEX, and are pivotal to the automated market maker (AMM) used by these platforms.

Without them, it would be difficult to track your contribution to the liquidity pool. LP tokens determine your share of fees generated from the transactions on the pool.

Besides unlocking liquidity on DEXs, LP tokens have other uses. For example, you can use them to participate in 

 (IDOs), as collateral for crypto loans or stake them for more rewards through yield farming. 

In crypto, token prices are determined through 

 rely on market makers, takers and order books to execute trades. However, control over these platforms remains in the hands of a central authority who may maliciously manipulate prices.

However, DeFi has provided an alternative approach to trading through DEXs that use such AMMs as 

 rather than people controlling the order book.

AMMs use LP tokens to remain noncustodial. By not taking ownership of your LP tokens, they promote transparency and fairness. You own the LP tokens and can use them to trade tokens across the DeFi ecosystem and withdraw liquidity without interference.

refers to the ability to quickly trade an asset without causing a significant change in its price. Currently, 

 is the most liquid asset in the crypto market since you can trade it on many exchanges without impacting its price.

However, the DeFi space typically has low liquidity since some tokens are available on only one exchange. At times, it’s challenging to find someone who wishes to trade a particular token. Moreover, tokens that are locked through 

 in proof of stake (PoS) blockchains such as 

 cannot be used for other purposes, which further removes liquidity from the DeFi ecosystem. The solution to the problem of locked liquidity is to use liquidity pools (or liquidity mining) to facilitate trades.

Through AMMs, LP tokens solve the problem of limited crypto liquidity as they function as proof of ownership of your staked tokens and can be used in numerous ways.

Once you provide a pair of crypto assets to a liquidity pool, the DEX automatically issues you LP tokens in proportion to the amount you deposited. For example, if you deposit assets worth $100 into a liquidity pool whose value is $1,000, you’ll be issued 10 percent of the LP tokens in that pool.

The amount of LP tokens you own represents your value in that pool and will be used to claim any interest earned from transactions. They’ll reflect on your crypto wallet, and you can freely move them around to different 

 to maximize your profits. When you withdraw LP tokens, you lose your share of the liquidity pool.

You can only acquire LP tokens if you’re a liquidity provider. To become one, you need to lock up your crypto assets on DeFi DApps such as Uniswap, 

However, centralized exchanges now offer liquidity provision through 

, allowing users to provide liquidity to different pools and earn rewards. In this case, you won’t receive LP tokens since custody lies with the centralized exchange.

The main reason for having liquidity provider tokens is to earn passive income from the fees generated by a liquidity pool. However, you can also use them for different purposes across the DeFi network.

There are two ways to maximize your profits with 

. You can either manually move your tokens across different DeFi protocols, or you can deposit your LP tokens into the liquidity pools of various protocols such as 

, which help you earn compounded interest. 

To manually move your tokens, start by depositing a crypto token pair into a liquidity pool on a DeFi protocol, then deposit the LP token you receive in another protocol. You’ll earn twice from your liquidity provider token — as a liquidity provider and by farming yields. 

You can use LP tokens as collateral to secure a crypto loan. 

, in which lenders receive interest from borrowers, has become a popular DeFi product.

For example, you can use your LP tokens on Aave as collateral for a loan. You can also use them to borrow DAI, ETH, 

An initial DEX offering (IDO) is a crypto token offering held on a DEX. LP token holders on a particular DEX can participate in the IDO of that DEX to invest in a new cryptocurrency project.

As with other crypto assets, owning LP tokens isn’t without risk. Here are some of the common risks associated with LP tokens.

Once you opt to lock your tokens into a crypto liquidity pool, you may miss out on other opportunities in the crypto market. For example, instead of providing liquidity to earn LP tokens, your funds might be better off in more lucrative crypto investments.

Perhaps the most inherent risk of owning LP tokens is

. By providing liquidity, you may suffer from inherent loss when the value of the amount you’ve deposited is greater than the value you withdraw upon exiting the pool. Impermanent loss occurs due to price changes over time.

Usually, liquidity pools that contain volatile trading pairs are more prone to impermanent loss. To reduce the risk of impermanent loss, you can opt for stablecoin pairs, which often have a smaller price range.

One of the ways some DeFi protocols cushion LP token holders from impermanent loss is by charging substantial fees for transactions. For example, liquidity providers on Uniswap receive a share of 0.3% fees charged on trades. As such, despite the exposure to impermanent loss, you’re compensated by generous transaction fees.

Liquidity pools are governed by using smart contracts. When you stake LP tokens into a DeFi protocol, you’re trusting the strength of the network’s smart contract. However, 

In the past, smart contracts have been exploited, leading to loss of funds. If your LP tokens are locked in a smart contract that fails, you could lose them and the liquidity that you’ve provided.

That said, most platforms have instituted security measures, such as 

, to keep their smart contracts safe from hackers.

Similar to other tokens, you could lose your LP tokens permanently if you can’t access your 

What Are Liquidity Provider (LP) Tokens – And How Do They Work?

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