Liquidity Pools
Pooled assets in a smart contract that enable trading on decentralised exchanges.
Quick answer
Liquidity pools are pooled assets in a smart contract that power decentralised exchange trading.
Definition
Liquidity pools are funds locked in a smart contract that let users trade tokens on decentralised exchanges without an order book. Price moves against the pool balance as trades are filled. They are a core part of crypto trading and can be a source of slippage on larger orders.
How It Works
- They replace the order book in DeFi
- Trades move the pool price
- Slippage grows on larger orders
Trading Tips
1
Check pool depth before a large trade
2
Expect more slippage in thin pools
3
Know that pool pricing differs from an order book
Related Terms
Start Trading
Put Your Knowledge Into Practice
Compare regulated brokers and find the best one for your trading style.