What is a Liquidity Pool?

Liquidity pools are an automated market making strategy used in decentralized exchanges like Uniswap, Curve, Kyber and Bancor. Although these exchanges use different approaches, at their core they consist of transactions traded against a smart contract, and not other traders as in the traditional order book model.

Anyone can become a liquidity provider by depositing crypto into a liquidity pool to earn trading fees in proportion to their share in the pool.

Learn more with our deep dive into liquidity pools.