What is a Liquidity Pool?
A collection of funds locked in a smart contract, used to facilitate decentralized trading and other DeFi activities.
Key details
- Automated
- Enables automated market making for decentralized exchanges.
- Yield Generation
- Liquidity providers earn fees from trades.
- Dual-Asset
- Typically contains a pair of tokens in equal value.
- Slippage
- Larger pools generally offer lower slippage for trades.
Examples
- 01Uniswap's ETH/USDC pool for swapping between ETH and USDC.
- 02Curve Finance's stablecoin pools for low-slippage stablecoin swaps.
- 03Balancer's multi-asset pools for more complex token ratios.