Liquidity pool (DeFi)
A liquidity pool is a collection of funds locked in a smart contract[2] that facilitates decentralized trading on automated market maker (AMM) platforms. These pools are essential components of decentralized exchanges (DEXs) like Uniswap, Sushiswap,[3] and PancakeSwap,[4] 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.[5][6]
See also
References
- ↑ "Pools". Uniswap.
- ↑ "Liquidity Pools Explained: Simplifying DeFi for Beginners". Bitpay.
- ↑ "Swap | Sushi 🍣".
- ↑ "What are Liquidity Pools in Crypto". Plena Finance.
- ↑ Ringdorfer, André. "What are Liquidity Pools?". Heliswap.
- ↑ K, Sankrit. "What Are Liquidity Pools and Crypto Market Liquidity in DeFi". CoinGecko.
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