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What is a Liquidity Pool in DeFi? ๐ค
A Liquidity Pool is a collection of crypto funds stored in a smart contract to make trading easier on DeFi platforms.
In simple terms, it works like this:
โข Users deposit crypto into the pool
โข These funds are used by others for swaps / trading
โข Liquidity providers receive fees as a reward
A simple example:
If you deposit ETH & USDT into a liquidity pool, you help provide liquidity for traders.
In return, youโll receive a share of the transaction fees that occur in that pool.
Thatโs one way to generate income in DeFi.
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