  We investigate how liquidity providers (LPs) choose between high- and low-fee
trading venues, in the face of a fixed common gas cost. Analyzing Uniswap data,
we find that high-fee pools attract 58% of liquidity supply yet execute only
21% of volume. Large LPs dominate low-fee pools, frequently adjusting
out-of-range positions in response to informed order flow. In contrast, small
LPs converge to high-fee pools, accepting lower execution probabilities to
mitigate adverse selection and liquidity management costs. Fragmented liquidity
dominates a single-fee market, as it encourages more liquidity providers to
enter the market, while fostering LP competition on the low-fee pool.
