Liquidity pool
defi · markets
A smart contract reserve of assets that enables AMM trading, lending, or swaps without a traditional order book.
- Also known as
- lp, amm pool
A liquidity pool holds assets supplied by liquidity providers. In AMMs, traders swap against the pool's reserves at prices determined by a formula rather than matching directly with another trader.
Liquidity pools expose LPs to impermanent loss, smart contract bugs, oracle or price manipulation, MEV, and incentive changes. Pool depth also affects traders through slippage.
Related terms
Decentralized Exchange
→A decentralized exchange (DEX) lets users trade digital assets from their wallets through smart contracts or peer-to-peer settlement.
trading · exchange · blockchain
Impermanent loss
→The underperformance an AMM liquidity provider can face versus simply holding the deposited assets when prices diverge.
defi · markets
Fungible Token
→A fungible token has interchangeable units, so each unit of the same token is equivalent for payment, accounting, or trading.
token · standard
Front-Running
→Front-running means acting on knowledge of a pending trade or transaction to execute first and capture an advantage.
trading · attack
Flash Loan
→A flash loan is an uncollateralized DeFi loan that must be borrowed and repaid within the same transaction.
defi · lending