Liquidity Pool
A pot of two or more tokens locked in a contract that traders swap against, with prices set by a formula rather than an order book. Depositors earn a share of the trading fees.
Also called liquidity pools · AMM · automated market maker
A pot of two or more tokens locked in a contract that traders swap against, with prices set by a formula rather than an order book. Depositors earn a share of the trading fees.
Why it matters
Depositors are exposed to impermanent loss when the pooled assets move apart in price.
Related terms
- Impermanent Loss
- DeFi
- Yield Farming
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