What is Liquidity Pool? How does it work?

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WHAT IS LIQUIDITY
POOL? HOW DOES IT WORK?
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• Decentralized Finance DeFi is a next-generation
  financial ecosystem with a market value of more
  than 60 billion.
• Liquidity pools are one of the basements
  technology-based DeFi systems. Below listed are
  an essential part of an
• Automated Market Makers AMM
• Yield farming
• borrow-lend protocols
• Blockchain gaming
• Synthetic assets
• On-chain insurance

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Introduction
Liquidity pools are one of the game- changing
innovations in a DeFi ecosystem. It provides
liquidity by a collection of a pool of funds
available in a smart contract. As of December
2020, there are almost 15 billion dollars value
tokens are available in DeFi protocols. In
today's market, the ecosystem is expanding with
new types of products.
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What is a

• A liquidity pool is nothing but a pool of digital
  funds locked in a DeFi smart contract. The
  primary purpose of the liquidity pool is to
  facilitate trading, lending in a decentralized
  manner. A liquidity pool is the backbone of many
  decentralized exchanges DEX like Uniswap.
• Here are some of the popular exchanges that use
  liquidity pools on Ethereum ERC-20 token. They
  are,
• Sushiswap
• Curve
• Balancer
• Here are the liquidity pools contains BEP-20
  tokens. They are,
• PancakeSwap
• BakerySwap
• Binance Smart Chain BSC
• BurgerSwap

liquidity
pool?
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How does the liquidity pool works?
By the Automated market makers (AMM), a
significant innovation update to the DeFi
system. That allows on-chain trading techniques
without the use of the order book technique. In
the on-chain trading technique, there is no
direct counterparty required to execute
trades. Closing thoughts Liquidity pools are the
backbone behind the DeFi technology. They made
it possible for the technologies like
decentralized trading, lending, yield
generation. These DeFi smart contracts almost
power every part of a DeFi system.
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Contact us
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