What are LP Pools & IL

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.

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