On centralized exchanges, liquidity providers must submit limit orders continuously to the markets. They are required to quote (binding) bid and ask prices at all times (almost – in practice, a liquidity provider usually commits to 90%+ uptime). In the liquidity provision contracts, token projects or exchanges define the expected liquidity depth per market to be maintained by the cryptocurrency liquidity provider. Usually, a liquidity provider utilizes market making strategies at the heart of their operations.
So what about a market maker? It is not a primary objective of all market makers to provide market liquidity. There are profit-driven market makers, usually operating with their own capital. Executing thousands of small transactions, they make money on the spread between the quoted bid and ask orders. These guys do not really care whether they create deep-order books (in the case of centralized trading platforms) for an exchange or token. In fact, their orders can be really small, but the number of transactions they execute can add up to a nice profit. Profit-driven market making companies will not bother themselves with uptime, either. They have no obligation to quote continuously, so, for example, in a time of high volatility, they might draw back and wait.
However, some market makers do what liquidity providers do. They are called designated market makers (DMMs) – a special market maker, whose contractual obligation is to maintain binding quotes for a specific asset. As known from traditional markets, a designated market maker is one that has been selected by the exchange as the primary market maker for a given security. Some good token projects engage 3 to 4 DMMs to manage their liquidity. Many less liquid exchanges also hire multiple DMMs to do the job for the markets they consider crucial for the growth of their platforms.
So the DMMs are the core liquidity providers for the token projects or exchanges. When crypto token issuers or exchanges refer to their market makers, they usually mean their liquidity providers or DMMs.