Liquidity pool
A smart contract reserve of assets that enables AMM trading, lending, or swaps without a traditional order book.
- Also known as
- lpamm 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
5 linkedExplore connected entries beyond the alphabetical index.
Decentralized Exchange
→A decentralized exchange (DEX) lets users trade digital assets from their wallets through smart contracts or peer-to-peer settlement.
Impermanent loss
→The underperformance an AMM liquidity provider can face versus simply holding the deposited assets when prices diverge.
Fungible Token
→A fungible token has interchangeable units, so each unit of the same token is equivalent for payment, accounting, or trading.
Front-Running
→Front-running means acting on knowledge of a pending trade or transaction to execute first and capture an advantage.
Flash Loan
→A flash loan is an uncollateralized DeFi loan that must be borrowed and repaid within the same transaction.
All terms and definitions may update as the Cryptionary improves.
