What is a liquidity provider (LP)?

A liquidity provider (LP) is anyone who deposits tokens into a pool so other people can trade against them; in return the pool pays them a share of its swap fees, pro rata to the liquidity they contributed while it was actually used.

Providing liquidity means parking value where trades happen. Every swap through the pool pays an LP fee, and the pool attributes that fee to the positions that were in use at swap time. On a concentrated-liquidity AMM, 'in use' means in range: the market price sat inside the band your deposit covers while the trade executed.

A position outside its range contributes nothing and earns nothing, which is why active LPs watch range boundaries the way market makers watch quotes.

The pool rebalances you automatically: arbitrageurs buy from it when the outside price is higher and sell into it when it is lower, so after a big price move your position holds more of the token that fell and less of the one that rose than a wallet that simply held both would have. The gap between the pool outcome and the hold outcome is divergence loss (often called impermanent loss).

Swap fees are the payment for taking that side. Whether providing liquidity nets positive depends on fees earned versus divergence suffered — a result no interface can promise in advance.

A pool's fee tier is fixed at creation in standard Uniswap deployments. Hooks can make the fee dynamic instead: Hookr's Surge Fees block scales the LP fee between a configured base and ceiling based on how much of the pool's in-range depth a single trade consumes, so large trades in shallow pools pay more without any oracle involved.

Hooks can also route value to LPs directly. Hookr's LP Rewards block donates an ETH-side share of qualifying buys to in-range positions inside the same swap — only buys donate; a sell pays the ordinary LP fee.

Hookr's current Instant Launch locks the whole token supply in one launchpad-owned token-only sell position, while a successful auction locks its reserved supply and the quote it absorbs in one full-range position. Neither path exposes a function that removes its launch position. The first Leveraged Hooks factory, hook, and router contracts are deployed, but this page's bonded module marketplace and leverage trading surface are not; providing liquidity to a future credit-enabled market would mean underwriting its downside.