What is a Liquidity Pool?
A liquidity pool is a smart contract containing paired tokens that facilitate trading on decentralized exchanges. Users who deposit tokens become liquidity providers (LPs).
How It Works
Instead of order books, AMM DEXs use pools. Traders swap against the pool, and prices adjust based on supply ratios.
Earning from Pools
LPs earn a share of trading fees proportional to their contribution. Some pools also offer additional token rewards.