@bunnysvinnys
A liquidity pool in DeFi is a collection of funds locked in a smart contract that facilitates decentralized trading, lending, or other financial services. These pools are created by users (liquidity providers) who deposit their assets into the pool, and in return, they earn a share of the fees generated by transactions made on the platform. For example, in decentralized exchanges (DEXs) like Uniswap, users trade tokens directly from these liquidity pools instead of through an order book. Liquidity pools enhance the efficiency and availability of trading without relying on centralized intermediaries, while also allowing liquidity providers to earn passive income from the fees.
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