What happens when you withdraw LP tokens?

When you withdraw your liquidity provider (LP) tokens from a decentralized exchange (DEX) or a liquidity pool, several things occur. Firstly, you're essentially removing your share of the liquidity that you had contributed to the pool. This means that the pool's overall liquidity will decrease, which could potentially affect the trading fees and slippage rates for users trading within that pool. Secondly, upon withdrawing your LP tokens, you'll typically receive back the underlying assets that you had initially deposited into the pool in a proportional amount based on your share of the pool's total liquidity. This could include tokens of the trading pair you were providing liquidity for, such as Ethereum and a stablecoin. Lastly, it's important to note that withdrawing your LP tokens can also result in a loss of potential rewards or incentives that you may have been earning by providing liquidity to the pool. These rewards can vary depending on the protocol and may include trading fees, interest, or other tokens as incentives for contributing liquidity. So, in summary, withdrawing your LP tokens involves removing your share of liquidity from a pool, receiving back your underlying assets, and potentially forgoing any future rewards or incentives that you may have been earning.