I always thought the exact opposite of this was the case, i.e. Selling @ Bid or Buying @ Ask is providing liquidity.
I am a liquidity provider about 90% of the time. The other 10% is for spec positions ONLY DURING CERTAIN TIMES. In times like these (volatility), liquidity dries up and I am the only one willing to take the risk of being slapped in the face. So far, I am making more money then I have ever in my trading career. Also OP is right. Taking liquidity is hitting and lifting, providing liquidity is joining the bid or ask. What if everyone left the bid or ask? There would be no liquidity. OP: Your logic is very solid, but I find that timing is the key to knowing when to provide and when to take. Although IMO, providing has the edge most of the time.