What is a liquidity provider?
A liquidity provider is a decentralized exchange (DEX) user who funds a liquidity pool with different tokens. These tokens facilitate fast trading by other users. The liquidity provider receives income for letting others use their tokens.
Why Are Liquidity Providers Necessary?
Traditional markets which deal in stocks, bonds and currencies often operate according to an order book model. This model tracks buy orders, sell orders and order history.
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