A liquidity pool is a collection of funds locked in a smart contract that facilitates trading on decentralized platforms by providing liquidity. Users deposit their assets into the pool and, in return, earn rewards from trading fees.
This mechanism is fundamental to the operation of decentralized exchanges and other DeFi protocols, enabling continuous trading without traditional order books.
Liquidity pools are a cornerstone of decentralized finance, offering an innovative way for users to earn passive income while supporting the network.
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