  Decentralized exchanges (DEXes) have introduced an innovative trading
mechanism, where it is not necessary to match buy-orders and sell-orders to
execute a trade. DEXes execute each trade individually, and the exchange rate
is automatically determined by the ratio of assets reserved in the market.
Therefore, apart from trading, financial players can also liquidity providers,
benefiting from transaction fees from trades executed in DEXes. Although
liquidity providers are essential for the functionality of DEXes, it is not
clear how liquidity providers behave in such markets. In this paper, we aim to
understand how liquidity providers react to market information and how they
benefit from providing liquidity in DEXes. We measure the operations of
liquidity providers on Uniswap and analyze how they determine their investment
strategy based on market changes. We also reveal their returns and risks of
investments in different trading pair categories, i.e., stable pairs, normal
pairs, and exotic pairs. Further, we investigate the movement of liquidity
between trading pools. To the best of our knowledge, this is the first work
that systematically studies the behavior of liquidity providers in DEXes.
