Liquidity is what users take when they interact with a market. A market is a collection of liquidity that can be swapped for another asset (the quote asset).

The base asset of the market determines the kind of liquidity that a market accepts. For example, if a marketโ€™s base token is ETH, then the liquidity provided to it can only be ETH.

The liquidity provider is known as a maker, seller, or merchant on centralised peer-to-peer marketplaces. The users who swap the liquidity are known as takers or swappers.

Liquidity Provider

A liquidity provider is a person or entity that transfers any amount of a marketโ€™s base token into the market.

The asset provided as liquidity can then be swapped for the marketโ€™s quote asset at an exchange rate determined by the liquidity provider.

For example, in an ETH/USDT market, the liquidity provider transfers ETH into the market and receives USDT after a successful swap event.

A liquidity provider can add or remove liquidity at any time.

Liquidity Pricing

Liquidity providers are responsible for setting the price of their liquidity.

The liquidity provider will be required to specify how much of the marketโ€™s quote asset they want in exchange for a base asset.

Liquidity providers can update the price and other liquidity parameters at any time.

Liquidity Manager

A liquidity manager is a wallet that can be granted permission to update the price of liquidity.

Liquidity providers may use automated services that automatically manage the price of their liquidity to keep it in sync with the current market price.

Liquidity managers can only alter price and nothing else.

Liquidity Parameters

There are other parameters that a liquidity provider can adjust to manage their trading experience within a market. They include:

Minimum Swap Amount

This is the minimum amount of liquidity that can be swapped per transaction. A swap request will fail if the swap includes an amount lower than the liquidity's set minimum.

Maximum Swap Amount

The maximum swap amount limits the amount that can be swapped in a single transaction. This limit can help a liquidity provider manage how quickly their liquidity is depleted.

Payment Time

Liquidity providers can specify the time they expect to send or receive payment.

In an interactive market where the provider is expected to send payment off-chain, the payment time tells the protocol and the counterpart how long to wait.

On the other hand, if the liquidity provider expects payment from the counterpart, the payment time determines how long to wait.

When this payment time elapses, a grace period is entered. If the payment is still not received, the swap becomes eligible for cancellation by the counterparts.


Liquidity providers can pause their liquidity at any time. To pause liquidity means to prevent takers from initiating new swap requests.

Pausing is helpful when the liquidity provider wants to take a break but does not want to remove their liquidity.

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