> For the complete documentation index, see [llms.txt](https://fomopad.gitbook.io/fomopad/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://fomopad.gitbook.io/fomopad/2.-hightlight/2.3-lp-tax-mechanism.md).

# 2.3 LP Tax Mechanism

FomoPad’s LP tax mechanism aims to encourage long-term LP holdings to increase market liquidity and stability. With a decreasing tax rate that drops from 20% on day one to 5% after 15 days or more, users are motivated to keep their funds in the liquidity pool, avoiding frequent short-term speculation. Additionally, part of the collected tax is used for token burning, reducing the circulating supply and enhancing token scarcity, which further stabilizes prices and supports market health.