A liquidity provider is someone who provides assets (liquidity) to a pool of funds. The more liquidity provided to a pool, the less slippage there is on a trade and the better the price discovery. By providing liquidity to Uniswap, the liquidity provider is rewarded by receiving a share of the fees earned in that pool proportional to the liquidity provided. This is one of the simplest and lowest risk forms of yield farming on Ethereum.
You might be interested to also see the following guides:
- Introducing De.Fi
- What is DeFi?
- What are pools?
- What to consider before farming yield?
- What is yield farming?
- What is Total Value Locked (TVL)?
- What Is the Annual Percentage Yield (APY)?
- What is liquidity mining?
- What is composability?
- What is a stablecoin?
- What is a liquidity provider?
- What are the potential use cases for DeFi?
- How to avoid getting Rekt with Yield Farming
- Why Are You Miscalculating Your Impermanent Loss And How To Stop Doing It
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