What is a liquidity pool?
A liquidity pool is a collection of funds locked in a smart contract. Liquidity pools are used to facilitate decentralized trading, lending and many more functions.
- Liquidity Pools are the game-changing innovation in Decentralized Finance (DeFi) that facilitates trading on Decentralized Exchanges (DEX) and provide liquidity through a collection of funds locked in a smart contract.
- Users called liquidity providers (LP) add an equal value of two tokens in a pool to create a market. In exchange for providing their funds, they earn trading fees from the trades that happen in their pool.
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What are liquidity pools used for?
Pooling liquidity is a profoundly simple concept, so it can be used in a number of different ways.
- One of these is yield farming or liquidity mining. Liquidity mining has been one of the more successful approaches. The tokens are distributed algorithmically to ...
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