Liquidity Pools

Liquidity pools are a feature of DEXs (decentralized exchanges used to trade cryptocurrencies and tokens). They allow people to trade on or between DEXs without any middlemen. Liquidity pools are a mechanism by which users pool assets in a DEX’s smart contracts to provide asset liquidity for traders to swap between cryptocurrencies. Liquidity pools incentivize users to provide crypto asset liquidity into these pools by allowing users to receive a share of trading fees and/or earning “rewards” in the form of additional/new tokens. In short, more assets and more liquidity “staked” in a pool generally means faster, easier trading on DEXs.