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What Is a “Liquidity Pool” and How Does It Relate to TWAP Calculation?

A smart contract holding crypto assets for trading. The TWAP oracle samples the price from this pool at intervals to calculate an average.
Greeks.Live22.11.25

What Is a “Liquidity Pool” and How Does It Relate to TWAP Calculation?

A liquidity pool is a smart contract holding a pair of crypto assets that enables trading on a DEX. A TWAP oracle calculates its price by sampling the price of an asset from a liquidity pool at regular intervals and averaging those samples over time.

The pool's continuous trading activity provides the raw, time-stamped price data necessary for the TWAP calculation.

What Is a “Time-Weighted Average Price” (TWAP) Oracle and Why Is It Preferred over a Spot Price Oracle?
How Does a TWAP Oracle Differ from a Volume-Weighted Average Price (VWAP) Oracle?
What Is a Volume-Weighted Average Price (VWAP) and How Does It Differ from TWAP?
What Is a Time-Weighted Average Price (TWAP) Oracle and Why Is It Used?

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