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Liquidity pool (DeFi)

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Collection of funds locked in a smart contract
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Liquidity pools in the Decentralized Exchange Uniswap

A liquidity pool is a collection of funds locked in a smart contract that facilitates decentralized trading on automated market maker (AMM) platforms. These pools are essential components of decentralized exchanges (DEXs) like Uniswap, Sushiswap, and PancakeSwap, allowing users to trade digital assets without relying on a centralized order book. Instead, liquidity is provided directly by users, known as liquidity providers (LPs), who contribute equal amounts of two different tokens into a pool. In return for providing liquidity, LPs earn a share of the trading fees generated by the pool, proportional to their contribution.

See also

References

  1. "Pools". Uniswap.
  2. "Liquidity Pools Explained: Simplifying DeFi for Beginners". Bitpay.
  3. https://www.sushi.com/ethereum/swap
  4. "What are Liquidity Pools in Crypto". Plena Finance.
  5. Ringdorfer, André. "What are Liquidity Pools?". Heliswap.
  6. K, Sankrit. "What Are Liquidity Pools and Crypto Market Liquidity in DeFi". CoinGecko.
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