@georginaee8
What is a liquidity pool in DeFi?
A liquidity pool is a collection of tokens locked in a smart contract to facilitate decentralized trading, lending, and yield farming.
How it Works: Users deposit assets into a pool, and in return, they receive a share of transaction fees when others trade against the pool.
Examples: Uniswap, SushiSwap, and Balancer.
Risks: Liquidity providers may face impermanent loss if the asset prices fluctuate significantly.
Liquidity pools play a key role in DeFi by ensuring efficient and automated trading without the need for centralized order books.
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