Sense

Crypto Lesson with /sense 

What is a liquidity pool ? 

A crypto liquidity pool is a collection of cryptocurrencies locked in a smart contract that provides liquidity for decentralized trading, lending, and other DeFi services.

🔍 In Simple Terms
A liquidity pool is like a pot of tokens provided by users so others can trade, swap, or borrow crypto without needing a traditional buyer or seller on the other side.

🧱 How It Works
Users (called liquidity providers, or LPs) deposit equal values of two tokens (e.g., ETH and USDC) into a pool.
The pool enables other users to swap between those tokens using an automated market maker (AMM) instead of a traditional order book.
In return, LPs earn a share of the trading fees generated by swaps in the pool.

🧮 Example:
Alice deposits $1,000 of ETH and $1,000 of USDC into a pool.
Bob swaps USDC for ETH using that pool.
A small fee (e.g., 0.3%) is taken from Bob's trade and distributed to Alice and other LPs.

Crypto Quiz with  /sense 

Which of the following statements is not true about liquidity pools ? 

A - A liquidity pool is a pot of tokens designed to facilitate trades

B -  Liquidity providers send one token to a pool

C - A liquidity pool uses smart contracts to operate instead of a traditional order book

D - Liquidity providers earn a share of trading fees generated by the pool

Hodler exploring web3. Solana airdrop farmer, bitcoin solo miner, Helium network miner, and Medium blogger. 🎭🎭🎭