Category: 6. What Is a Liquidity Provider in Cryptocurrency?

There are a great many DEXs that utilise the AMM type protocol to create liquidity pools, which you can become a liquidity provider for. Here is a sample list of some DEXs and a brief explanation of their unique features. 1. Uniswap Uniswap is one of the oldest DEXs around, and one of the first…

So if you were to contribute liquidity (in the shape of assets) to liquidity pools on these DEXs, you would be issued LP tokens. These tokens track your individual contributions to the overall liquidity pool and correspond in direct proportion to your share of liquidity in the overall pool. The value of 1 LP token…

When people provide liquidity on decentralised exchanges or DEXs that operate on the automated market maker (AMM) protocols, they are usually issued separate tokens that represent their share of liquidity on the liquidity pools. These are called liquidity provider tokens or liquidity pool tokens, abbreviated as LP tokens. Uniswap and SushiSwap are major DEXs on…

The short answer is yes, you can reliably make money from becoming a liquidity provider by earning a portion of the trading fees imposed by the DEX on traders. Bear in mind, however, that this all comes with its own caveats and risks you must understand.  We’ll briefly cover some of the risks of becoming…

Liquidity Providers are how decentralised exchanges or DEXs allow people to trade without an intermediary. Instead of having a large central entity providing all of the digital assets for trading, DEXs rely on individuals and institutions to provide their own cryptocurrencies to a common pool, with which others may trade. These providers are called Liquidity…