Liquidity Provisioning Strategies

Definition ∞ Liquidity Provisioning Strategies are the various methods and approaches employed by individuals or entities to supply digital assets to decentralized exchanges, lending protocols, or other decentralized finance applications. These strategies aim to generate returns through trading fees, interest, or protocol rewards. They involve careful consideration of risk, return, and market conditions.
Context ∞ News often discusses the effectiveness and risks associated with different Liquidity Provisioning Strategies, particularly concerning impermanent loss and capital efficiency. The evolution of automated market maker designs, such as concentrated liquidity, continuously changes these strategies. Participants seek optimal approaches to contribute to market depth while maximizing their yields.