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
Keep reading
Exchange
A venue for trading assets. A centralised exchange holds customer funds and matches orders…
Token
A digital asset issued on an existing blockchain rather than having its own. Tokens…
Audit
A review of a smart contract's code by a specialist firm, looking for vulnerabilities…
Smart Contract
A program stored on a blockchain that runs automatically when its conditions are met,…
Self-Custody
Holding your own keys rather than leaving assets with an exchange or custodian.
Circulating Supply
The number of tokens currently available to trade, excluding those locked, reserved or not…