word
Liquidity Pool
lih-KWID-ih-tee POOL
/lɪˈkwɪd.ɪ.ti puːl/Listen
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Syllable breakdown
Liquiditypool
Dictionary meaning
A crowdsourced collection of cryptocurrency tokens locked in a smart contract to provide liquidity for decentralized exchange trading, lending, or other DeFi services; providers earn fees or rewards in exchange for their contribution.
Examples
- She added equal amounts of ETH and USDC to the liquidity pool and earned 0.3% of every swap.
- The liquidity pool dried up during the market crash, making it impossible to execute large trades.
Synonyms: LP pool, AMM liquidity, DEX pool, token pool
Pronunciation tips
Liquidity pools replace traditional order books. Automated Market Makers (AMMs) use math (constant product formula x*y=k) to set prices based on pool ratios.
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