Liquidity Provider


A liquidity provider is an individual or entity that funds a liquidity pool with cryptocurrency assets to facilitate trading on a platform, typically a decentralized exchange (DEX).


Liquidity providers earn transaction fees based on the trading volume that goes through the pool, compensating them for providing capital and taking on the risk of price fluctuations. This role is fundamental to the functionality of decentralized finance (DeFi) ecosystems, ensuring that there is enough liquidity for efficient market operations.