LeoGlossary: Liquidity Pool (LP)

1 mo (edited)
LeoFinance
1 Min Read
114 words

Cryptocurrency assets that are decentralized exchanges which facilitate the trading of pairs.

The tokens or coins are locked in smart contracts, providing liquidity, thus avoiding a problem common with such systems.

Unlike traditional exchanges, a buyer and seller is not required to complete a transaction. With liquidity pools trades occur simply because one accesses a pre-funded pool. This eliminates the need to find individuals will to swap two assets.

Liquidity Pools are an essential part of decentralized finance (DeFi).

Providers to the LP are rewarded for staking their asset. This can come in the form of the native token to the platform or from transaction fees.

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