What Are the Tax Implications of Providing Single-Sided versus Dual-Sided Liquidity?

The tax implications of providing liquidity can be complex and vary by jurisdiction. For dual-sided liquidity, depositing and withdrawing assets can be considered a taxable event, as you are effectively trading one asset for another (the LP token).

For single-sided liquidity, the tax treatment may be different, as you are not directly trading your asset. However, the rewards earned from both types of liquidity provision are generally considered income and are taxable.

It is crucial to consult with a tax professional for specific advice.