Search
Results for “Market maker vs Liquidity provider”
Market maker
A market maker is a firm or trader that stands ready to both buy and sell an asset at publicly quoted prices, keeping an order book stocked. It earns mainly from the gap between the price it pays and the price it charges, the bid-ask spread.
What it means for you. When market makers are active you can usually trade quickly near the last price; when they pull back, as can happen in a sharp fall, spreads widen and your order can fill far from the quote. Before a large trade, look at the spread and the depth of the order book, not only the last price.
Sources: CFTC Glossary, Investor.gov glossary: Market Makers, Zhou, Qin, Ferreira Torres, Le and Gervais: High-Frequency Trading on Decentralized On-Chain Exchanges (arXiv) · checked 4 October 2026
Liquidity provider
A liquidity provider (LP) is someone who deposits a pair of tokens into a liquidity pool so others can trade against it. In return they receive LP tokens or a position that records their share, and they earn a portion of the pool's trading fees.
What it means for you. Your LP tokens or position are the only claim on your deposit; losing the wallet that holds them loses the deposit. When prices move, the pool rebalances and you can withdraw a different mix worth less than simply holding the two tokens. Fees may or may not make up the difference.
Sources: Uniswap docs: How Uniswap works, Uniswap docs: Pools (v2) · checked 4 October 2026