# Why should I provide liquidity? By [Charm Finance](https://paragraph.com/@charm-finance) · 2023-08-14 --- The question that needs to be asked (and answered) 🙂 Introduction ------------ Everything needs liquidity, but one of the biggest questions in crypto, and indeed in finance, is why should anyone provide liquidity? The answer is simple: > Liquidity providers earn yields when the market price goes up _or_ down. Liquidity Provision is therefore an excellent way to earn income from volatility, to diversify portfolios, or to hedge a position; but historically, these benefits are unavailable to most investors because they have been centralized by [market makers](https://www.citadelsecurities.com/what-we-do/what-is-a-market-maker/) such as [Citadel](https://www.citadelsecurities.com/), [Jump](https://www.jumptrading.com/), and [Jane Street](https://www.janestreet.com/what-we-do/overview/). DeFi opens up the benefits of liquidity provision to everyone; but providing liquidity have not achieved mass adoption due to a number of challenges. The challenges -------------- The challenges for liquidity providers (LPs) are: * **Not user friendly** LPs need to go through a number of steps when providing liquidity. * **Lack of choice** LPs cannot provide liquidity for any asset. * **High risk** There is a high risk of impermanent loss. * **Lack of useful information** LPs do not know how their returns are generated, nor can they reliably track the performance. * **High cost** Existing providers charge fees up to 50%, significantly lowering the returns for LPs. * **Lack of transparency** LPs do not know how their assets are being managed, because existing providers manage their assets off-chain. The solutions ------------- The [Alpha Vaults](https://alpha.charm.fi/vaults) super-app is the first to overcome all the challenges, and is therefore a super-app that unlocks the full potential of liquidity provision for everyone. It provides the following solutions for liquidity providers: ### Easiest way to provide liquidity LPs can provide liquidity in [1-click](https://alpha.charm.fi/). There is no need to pick a range or build your own LP Strategy. ### Unlimited choice If a Liquidity Provider cannot find a vault to provide liquidity, they can [create](https://alpha.charm.fi/create) it themselves with 1-click. ### Risk mitigation All vaults have a [mechanism](https://learn.charm.fi/charm/alpha-vaults-overview/whitepaper#overview-of-passive-rebalancing) to reduce the risk of Impermanent loss, and its effectiveness have been proven during 2+ of testing on Mainnet and L2. The [historical track records](https://charm-alpha.vercel.app/list) illustrates how the mechanism resulted in higher returns for LPs. ### Useful and transparent performance charts The vaults’ [performance charts](https://learn.charm.fi/charm/provide-liquidity/user-guides/performance-page) are taken from on-chain data, and track the LP’s overall performance, fees collected, capital efficiency, and much more… ### Low cost The total protocol fees is only [1% Uniswap fees](https://learn.charm.fi/charm/provide-liquidity/fees), which means Alpha Vault users will keep virtually all the gains. There are no entry fees, exit fees, or any other fees. ### 100% on-chain LPs have total transparency on how their assets are being managed, because the vaults’ [code](https://github.com/charmfinance/alpha-vaults-v2-contracts) and strategy is on-chain and verifiable by anyone. ### Security Alpha Vaults have one of the [longest](https://dune.com/srpho/Charm-Alpha-Vault-performace-fork?Number+of+days_t2d57c=750&Number+of+days_nba6d7=750) track records for security, with no security issues since [launching](https://twitter.com/CharmFinance/status/1390671266160549888?s=20) on 7th May 2021. In addition, it has received 3 [audits](https://learn.charm.fi/charm/appendix/audit-reports). Conclusion ---------- Why should I provide liquidity? Alpha Vaults is the answer - you can try it at [charm.fi](https://www.charm.fi). **Join the community** ---------------------- To be the first to receive updates, follow [@charmfinance](https://twitter.com/charmfinance) on Twitter. Feel free to ask questions, suggest ideas or chat about anything on [Discord](https://t.co/M5DS2tVNU4) or [Telegram](https://t.me/charmfinance). --- *Originally published on [Charm Finance](https://paragraph.com/@charm-finance/why-should-i-provide-liquidity)*