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What Is the Role of a “Liquidity Provider” in an AMM System?

LPs deposit token pairs into the pool to facilitate trading and earn a portion of the transaction fees generated.
Greeks.Live09.11.25

What Is the Role of a “Liquidity Provider” in an AMM System?

A liquidity provider (LP) deposits a pair of tokens into an AMM's smart contract pool to facilitate trading. In return for providing this capital, the LP receives a share of the transaction fees generated by the pool.

LPs are essential as they are the source of the liquidity that enables the DEX to function, allowing traders to execute swaps without needing a direct counterparty.

How Do Liquidity Providers (LPs) in a DEX Earn Fees?
What Is the Role of a ‘Liquidity Provider’ in an AMM?
What Is a ‘Liquidity Pool’ and How Is It Funded?
What Happens to the Remaining Allowance If a Contract Only Uses a Portion of It?

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