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What Is a Liquidity Pool in Decentralized Finance (DeFi)?

Tokens locked in a smart contract on a DEX to facilitate trading and swapping without an order book.
Greeks.Live28.10.25

What Is a Liquidity Pool in Decentralized Finance (DeFi)?

A liquidity pool is a collection of two or more tokens locked in a smart contract on a Decentralized Exchange (DEX). It facilitates trading by providing the necessary assets for users to swap between tokens without needing a traditional buyer or seller.

Liquidity providers (LPs) deposit an equal value of both tokens and earn trading fees in return. This is the foundation of automated market makers (AMMs).

How Do Hash-Based Commitments, like Hash Time-Locked Contracts (HTLCs), Facilitate Cross-Chain Atomic Swaps of Options?
What Is a ‘Yield Farm’ in the Context of DeFi?
What Are the Risks of Being a Liquidity Provider (LP)?
How Do Cross-Chain Swaps Introduce Complexity to DEX Smart Contracts?

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