# Liquidity Providers Liquidity providers are individuals who contribute their digital assets to a liquidity pool, forming the backbone of decentralized exchanges. These users lock their cryptocurrencies into the smart contract of a DEX, becoming liquidity providers in exchange for potential rewards. The compensation, typically in the form of trading fees, is distributed to liquidity providers based on the proportion of the total liquidity they contribute to the pool. This incentivizes users to participate actively, ensuring a robust and efficient trading environment within the decentralized ecosystem. The rewards are often distributed through LP tokens, which represent the liquidity provider's stake in the pool. Examples of liquidity providers include individuals contributing assets to pairs like SWTH-ETH on various DEX platforms. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://guide.dem.exchange/community/glossary/liquidity-providers.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.