Liquidity providers are decentralized exchange users that deposit their cryptocurrency into liquidity pools. Liquidity pools are supplies of cryptocurrencies managed by decentralized exchanges to improve transaction efficiency.

Exchanges compensate liquidity providers with transaction fees from activities that use a liquidity pool and distribute rewards according to how much currency a user has pooled. Liquidity providers’ funds are locked into the pool using smart contracts. Pools are permissionless, allowing anyone to contribute to the pool.

Q: What is a Liquidity Provider?

A: is a user who funds a liquidity pool with crypto assets that he or she owns to facilitate trading on the platform and earn passive income on her deposit.

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