People tend to think of market making as something reserved for firms with deep pockets, fast connections, and entire risk desks watching over every tick. In the traditional world, that’s mostly true. You don’t “dabble” in market making. You either have the infrastructure, or you don’t.
But DeFi rewired the structure. And once you understand how automated liquidity works, you start to see that liquidity provision — “LPing” — isn’t a side activity or a quirky yield trick. It’s an entry point into a business that used to be closed to everyone except institutions.
To see this clearly, you have to start with the simple idea that underpins both worlds: markets only function because someone is willing to take the other side. Or put another way, somebody has to buy what you’re selling.
That’s the job of a market maker in traditional markets.
But in Decentralized Finance, “DeFi,” something called an Automated Market Maker, an “AMM,” takes over the pricing work that human market makers used to do. The AMM sets prices using a simple formula based on the ratio of two assets in a pool. And the Liquidity Provider, the LP, is the one who supplies those assets. In other words, the AMM handles the quoting, and the LP steps into the role the market maker used to fill.
The mechanics look different, but the role is the same: you provide liquidity so others can trade, and you get compensated when they do.
How the AMM Changes the Gatekeeping
In traditional markets, making a market means posting bids and asks and constantly adjusting them as price and order flow change. It’s an active craft. Spread capture is the lifeblood, and speed matters.
Automated Market Makers flipped that model on its head. Instead of human traders adjusting prices, the AMM uses a price curve that moves automatically based on how much of each token sits in the pool. And instead of a trading desk holding inventory, the pool is filled by everyday LPs who supply equal value in two assets.
You no longer need a dedicated team, real-time hedging, high-frequency infrastructure, or privileged exchange access.
You set a price range and deposit assets, and the algorithm takes over quoting. That single shift lowered the barrier so dramatically that millions of small capital providers now participate in a business that was once an institutional monopoly.
This is why LPing resonates with people who think deeply about what the crypto markets are actually offering. It isn’t just a yield mechanism. It’s access to a completely new business model.
The Core Economic Logic
If you strip away the differences in machinery, the economics line up almost point-for-point. Both supply liquidity; they make trading possible in the first place. Both earn revenue from activity, not direction. Market makers earn the bid–ask spread. LPs earn the pool’s swap fees. Both take inventory risk. If assets diverge, the book tilts. The only difference is vocabulary.
This is why LPing feels familiar once you see it clearly: even though you’re operating inside an automated system, you are performing the same economic function.
And like any business, results depend on where you position yourself, the conditions you operate in, and whether the broader market rewards the structure you’re using.
Why This Matters for Smaller Investors
For most of financial history, market making wasn’t something individuals could participate in. Even if you had the capital, exchanges weren’t designed to let you access that role.
DeFi removed that wall.
LPing gives smaller investors a chance to turn capital into productive liquidity, earn fees from the natural flow of the market, operate a business model normally reserved for institutions, build positions in blue-chip assets while generating income, and experiment, iterate, and refine strategies without gatekeepers.
This doesn’t make LPing risk-free. It just makes it accessible. And accessibility is the entire point.
The old world required a firm. The new world requires that you understand the structure.
What LPing Looks Like When You Treat It as a Business
If you zoom out, LPing becomes less about pools and more about approach. You pick your “market”: ETH/USDC, WETH/CBBTC, or SOL/USDC, and each pair behaves differently. You choose your operating range: wide, narrow, straddle, or multi-band; each one is a business choice. You manage inventory, LPs fight divergence the way market makers fight imbalanced flow. You judge conditions, fee rates, volatility, depth, trend strength, all of them real inputs, not noise.
That’s the part many retail participants miss. LPing isn’t gambling on price. It’s understanding flow.
And when you understand flow, the entire experience changes. You stop seeing pools as passive farm plots and start seeing them as micro-businesses you run with your own capital.
The Opportunity in Front of You
The crypto market is still young. Liquidity is uneven. Volatility is frequent. Retail behavior is predictable. New institutional behavior is still settling into rhythm.
That combination creates inefficiencies, and inefficiency is the raw material of every market maker since markets began.
LPing lets small investors step into that space without pretending they’re running a prop desk. You’re operating inside a framework that does the mechanical work for you, leaving you free to make strategic decisions instead of tactical ones.
And at this moment in the evolution of digital markets, that is one of the rarest opportunities available: a real business model that ordinary investors can participate in directly, without permission, without middlemen, and without needing $50M in capital to matter.
