---
description: Offer staking of LP-tokens to further incentivize liquidity providers.
---

# LP Staking

Liquidity is a crucial factor in market conditions of any token as it enables smooth trading and ensures that there are enough tokens to meet the demand.&#x20;

Liquidity providing involves supplying cryptocurrency assets to a DEX liquidity pool. This pool is used for trading by other users, and in return, liquidity providers (LPs) earn rewards.&#x20;

{% hint style="warning" %}
Often, the process of liquidity providing is seen as quite convoluted and inaccessible for the average user.&#x20;
{% endhint %}

Kaizen enables you to create a simple and streamlined process that not only encourages participation with its accessibility, but also additional rewards.&#x20;

<figure><img src="https://43215698-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2Fr6HYywSeoVw5aaLC5b6e%2Fuploads%2FrEe5mDRLXugbyHAVozNp%2Fhofa-artem-lp-staking.png?alt=media&#x26;token=e9a6e7ac-dc01-4cfc-ad29-2ca8c0938679" alt=""><figcaption><p>An example of LP staking </p></figcaption></figure>

### How It Works

**Step 1: Providing liquidity to get LP-tokens**&#x20;

The user provides liqiduity by depositing equal values of the two assets in a target DEX pool. For example, for a KZEN/USDT pool you would deposit an equal value of KZEN and USDT into the liquidity pool.

In exchange for providing liquidity, the user receives LP-tokens. These tokens represent the user's share of the liquidity pool and their right to a portion of the trading fees generated by the DEX. LP-tokens can be used to claim rewards.

**Step 2: Earn Rewards**

As traders use the DEX to swap one asset for another, they pay trading fees. These fees are distributed among liquidity providers in proportion to their share of the liquidity pool. So, the more liquidity the user provides, the greater the rewards they can earn.

**Step 3: Stake LP-tokens**

The user can then stake their LP-tokens with your project to receive rewards in your project's token.&#x20;

{% hint style="success" %}
This creates a win-win scenario as the user benefits from additional earning while you receive peace of mind that liquidity will not be withdrawn and will remain in the pool for the during of user's staking period.&#x20;
{% endhint %}

**Step 4: Claim Rewards and Withdraw**

Periodically, the user can claim your earned rewards from the DEX by visiting the platform and redeeming their share of the fees. And when LP staking period is over, the user can also withdraw their initial assets and any accrued rewards from the liquidity pool along with the token rewards from a project's LP staking.

### Key LP Staking Benefits

As a project, you can user Kaizen's LP staking and customizable reward systems to further incentivize users to provide liquidity and earn rewards in the form of additional tokens or other incentives.

Moreover, you can issue dedicated LP tokens with unique value within the ecosystem to drive even more interest towards liquidity providing. For example, LP tokens could be used to vote on governance proposals or to access certain features within the ecosystem.

