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What Is a ‘Liquidity Pool’ in the Context of Automated Market Makers (AMMs)?

A liquidity pool is a smart contract containing token pairs, funded by LPs, against which trades are executed on a DEX.
Greeks.Live12.11.25

What Is a ‘Liquidity Pool’ in the Context of Automated Market Makers (AMMs)?

A liquidity pool is a collection of two or more tokens locked in a smart contract on a Decentralized Exchange (DEX). It is funded by Liquidity Providers (LPs).

Instead of matching buyers and sellers directly, trades are executed against the assets in this pool, with the price determined by an algorithm. This mechanism is the foundation for decentralized trading and lending, providing on-chain liquidity.

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