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What is a Liquidity Pool in DeFi? ๐ค
A Liquidity Pool is a collection of crypto funds stored in a smart contract to facilitate trading on DeFi platforms.
Simply put:
โข Users deposit crypto into the pool
โข The funds are used by others for swaps/trading
โข Liquidity providers earn fees as rewards
A simple example:
If you deposit ETH & USDT into a liquidity pool, you are helping to provide liquidity for traders.
In return, you will receive a share of the transaction fees that occur in that pool.
Thatโs one way to generate income in DeFi.
#Crypto #DeFi #Web3