Algorithm

Cryptos:

2,117

Exchanges:

10

Marketcap:

$2,120,311,295,469

Volume 24h:

$50,109,644,881

Liquidity Pool

What does Liquidity Pool mean in crypto terms?

A Liquidity Pool is a smart contract-based solution primarily used in decentralized exchanges (DEXs) that holds funds to facilitate trading by providing liquidity. Users, known as liquidity providers, deposit an equal value of two tokens in the pool, creating a market. In return, they receive liquidity tokens, representing their share in the pool. The prices of assets in the liquidity pool are determined by a mathematical formula based on the ratio of the two tokens. Traders can then swap between these tokens by adding or removing liquidity, with a fee being charged for the service, typically awarded to liquidity providers. Liquidity pools aim to solve the issue of order book depth and slippage in DEXs.

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