CRYPTO GLOSSARY · FINANCE

What is Liquidity Pool?

Pool of tokens enabling decentralized trading.

📖 Full Definition

A liquidity pool is a smart contract containing pairs of tokens that enable decentralized trading on AMM-based DEXs. Liquidity providers deposit tokens and earn fees from trades that occur within the pool.

💡 Example

A USDC/ETH liquidity pool on Uniswap allows traders to swap between the two tokens.

🔗 Related Terms

AMM

Automated Market Maker for decentralized trading.

DEX

Decentralized Exchange for peer-to-peer trading.

Yield Farming

Earning rewards by providing crypto liquidity.

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