Liquidity Pools: Automated Market Makers Next Evolution
Liquidity pools have revolutionized decentralized finance (DeFi), empowering users to trade cryptocurrencies 24/7 without relying on traditional intermediaries. These automated market makers (AMMs) offer a new way to earn passive income and participate in the DeFi ecosystem. But what exactly is a liquidity pool, and how does it work? Let's dive in and explore the world of liquidity pools.
What is a Liquidity Pool?
Definition and Purpose
A liquidity pool is a collection of cryptocurrencies locked in a smart contract. These pools are used to facilitate trading on decentralized exchanges (DEXs). Unlike traditional exchanges that use order books to match buyers and sellers, DEXs use liquidity pools to provide the necessary liquidity for trades to occur. This allows users to trade directly from...
