Polymarket101

Providing Liquidity (LP)

Earning rewards by providing market depth.

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Note: This is an advanced feature. Liquidity Providing involves risk.

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What is Liquidity Providing?

Instead of betting on "Yes" or "No", you provide USDC to both sides of the market. You are essentially acting as the "House" or a Market Maker.

  • You facilitate trades for others.
  • You earn a spread (fee) from the trading volume.
  • You may also earn Liquidity Rewards (extra USDC incentives) on promoted markets.

The Risks

The main risk is Adverse Selection (often called Impermanent Loss in AMMs).

  • If informed traders know the outcome is definitely "Yes", they will buy up all your "Yes" shares.
  • You will be left holding a bag of worthless "No" shares.
  • Rule of Thumb: Do not LP in markets that are about to resolve or have breaking news.

How to LP

  1. Go to the market page.
  2. Look for the Liquidity or Rewards tab (interface varies by market type).
  3. Deposit USDC into the pool.
  4. You will start earning rewards proportional to your share of the pool.
Polymarket 101 Team
Published: November 16, 2025
Updated: November 29, 2025
9 min read

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