What is the act of providing liquidity, and what does it mean for me as an investor? Providing liquidity is when a user or entity places their assets into a liquidity pool. A liquidity pool is its own ecosystem where the assets within it are priced in relation to one another. The relative pricing inside the pool is only altered when outside interactions such as trades or new “off-balance” investments occur. The expectation as a liquidity provider (LP) is that as market prices change, the liquidity pool will be interacted with, and the internal balances of tokens will most likely change over time.