Liquidity Provider (LP)
Someone who deposits assets into a pool so others can trade against them, earning a share of fees — and taking on impermanent loss.
A liquidity provider deposits a pair of assets into an AMM pool, supplying the inventory traders swap against. In return they earn a proportional cut of every swap’s fees and receive an LP token representing their share.
LPing is often marketed as passive income, but the honest accounting is subtler: fee revenue competes against impermanent loss, and many volatile-pair providers end up worse off than simply holding. The providers who profit reliably concentrate on high-volume, low-divergence pairs (like stablecoin-to-stablecoin) where fees comfortably exceed divergence losses.