> For the complete documentation index, see [llms.txt](https://guide.dem.exchange/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://guide.dem.exchange/community/glossary/liquidity-providers.md). # 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 This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation by asking a question. Perform an HTTP GET request on the following URL with the `ask` and `goal` query parameters: ``` GET https://guide.dem.exchange/community/glossary/liquidity-providers.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is what the user is ultimately trying to achieve, the reason they need the answer. Sharing it helps GitBook give you a better, more relevant answer. A goal is most helpful when it describes the outcome the user wants rather than restating the question. For example, with `ask=how do I create an API token`, a goal like `automate deployments from our CI pipeline` lets GitBook tailor the answer to that use case. 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.