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Home/Glossary/Liquidity pool
DeFi

Liquidity pool

Also called: pool · LP pool

In shortA pot of tokens locked in a smart contract that traders swap against on a DEX.

Pools are funded by liquidity providers, who earn a share of trading fees. When a new token's creators can withdraw the pool at any time, they can rug pull — "locked liquidity" lowers that risk.

← LiquidityAll terms A–ZLiquidity provider (LP) →

Related terms

  • Automated market maker (AMM)A type of DEX that prices trades with a formula based on the tokens in a liquidity pool, instead of an order book.
  • Liquidity provider (LP)Someone who deposits tokens into a liquidity pool to earn a share of the trading fees.
  • Impermanent lossThe loss a liquidity provider suffers compared with simply holding the tokens, when their prices drift apart.
  • Rug pullWhen a project's creators suddenly take the investors' money and disappear.
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