DeFi & Crypto Technical
Liquidity Pool
A pooled crypto-asset deposit enabling AMM-based trading — depositors (LPs) earn trading fees in proportion to their share.
Definition
A liquidity pool is a smart contract holding deposited crypto-assets that enable AMM-based trading. Liquidity providers (LPs) deposit assets in exchange for LP tokens representing their share; earn trading fees in proportion to their share. Subject to impermanent-loss risk.