Liquidity provisioning involves supplying assets to a trading platform or exchange to facilitate smoother transactions. In this process, individuals or entities, often called liquidity providers, deposit cryptocurrencies into liquidity pools. These pools allow other traders to easily buy or sell assets without significant price fluctuations.By contributing to these pools, liquidity providers earn fees from the trades that occur. This creates an incentive to maintain liquidity, ensuring that users can execute trades efficiently and at more stable prices.Liquidity provisioning is crucial for decentralized exchanges, where traditional market makers are absent. It helps reduce slippage—the difference between expected and actual trade prices—benefiting both traders and the overall market. Overall, liquidity provisioning plays a vital role in ensuring market stability, improving user experience, and supporting the growth of trading platforms.