BTC
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A pot of two or more tokens locked in a smart contract that traders swap against, with the people who supplied it earning fees.
Crypto Drafted with AI help · Reviewed by Keshav Aggarwal · Updated
In simple words
Imagine friends putting apples and oranges into one big basket. Anyone can swap an apple for an orange from the basket, leaving a tiny tip.
The friends who filled the basket share the tips. That basket is a liquidity pool.
The technical side
Liquidity providers deposit pairs of tokens, such as ETH and USDC, into a DEX pool and receive a share of trading fees. Prices in the pool shift with each trade according to a formula (Uniswap’s original rule keeps x × y constant).
If the two tokens’ prices move apart, providers can end up worse off than if they had simply held the tokens, a risk called impermanent loss. Pools can also be drained by contract bugs.
Liquidity Pool kya hai?
Liquidity pool do coins ki ek tokri hai jisse log trade karte hain. Tokri bharne walon ko fees milti hai, par daam badalne pe nuksaan bhi ho sakta hai.
Not investment advice. Crypto tokens can lose all their value. Read the risk disclaimer.
Related terms
- DEX (Decentralised Exchange)CryptoA crypto exchange run by smart contracts, where people trade straight from their own wallets with no company holding their funds.
- DeFi (Decentralised Finance)CryptoFinancial services such as lending, borrowing and trading that run on blockchain smart contracts instead of through a bank or broker.
- Smart ContractCryptoA program stored on a blockchain that runs by itself when its conditions are met, such as releasing funds once a payment arrives.