What are LP Pools & IL
Last updated
Last updated
Liquidity pools are stored crypto assets to make trading of major exchanges on DEX (decentralized exchanges) easier.
Liquidity pools are reserves of tokens secured in smart contracts.
They provide liquidity in DEX, attempting to mitigate the problems caused by the illiquidity in such systems.
The convergence of orders, establishing price quotations (if reached) decide whether the asset will continue to surge or decline, are also referred to as liquidity pools.
The same DEX that uses crypto liquidity pools uses AMM (automated market maker) approach. Such exchange platforms have the feature to replace conventional order books with pre-funded on-chain liquidity pools for both assets of the trading pair.
For more information pools and impermenant loss.See these videos from Whiteboard Crypto.