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Liquidity Pool

Intermediate

A liquidity pool is a collection of funds locked in a smart contract that facilitates trading on decentralised exchanges (DEXs) without relying on traditional buyers and sellers. Users deposit tokens into these pools and earn rewards or fees in return. Liquidity pools power automated trading using a method called Automated Market Making (AMM). They are core to DeFi platforms like Uniswap and PancakeSwap. While they offer earning potential, risks such as impermanent loss and smart contract vulnerabilities exist.

Related Words

Liquidity

Intermediate

Liquidity describes how easily a cryptocurrency or digital asset can be bought or sold without affecting its price significantly. High liquidity enables efficient trading with minimal slippage, important for active traders.

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Trading in Virtual Assets involves significant risk, including the potential loss of your entire capital. None of our communications are intended to provide investment, legal, or financial advice, nor to induce you to trade in such instruments. You should assess your risk tolerance and seek independent expert financial advice before trading. You must ensure that your use of BitDelta’s services complies with all applicable laws and regulations, as further detailed in our Terms and Conditions. Please carefully review our Terms and Conditions, Risk Disclosure Statements, and Security and Privacy Policies to understand the risks involved and the limitations on our liability before using our services.​
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