Un Liquidity Pool it's like a “pool” full of cryptocurrency. People put their tokens there so that others can easily exchange coins, such as exchanging ETH for USDC. In return, those who contribute to the pool earn commissions every time someone makes an exchange. This is how everyone wins: some change their coins and others make a profit by lending theirs.

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Un Liquidity Pool, or liquidity fund, is a reserve of two or more tokens deposited within a smart contract, designed to facilitate automatic asset exchanges on platforms decentralized (DEXs) without the need for a Traditional order book. This infrastructure is key to decentralized finance protocols (DeFi), such as Uniswap, Curve, Balancer, or PancakeSwap, where swaps are made directly against the pool instead of pairing buyers with sellers.

Liquidity Providers (LPs) deposit pairs of tokens (e.g., ETH/USDC) in specific proportions. In exchange, they receive LP tokens that represent their participation in the pool. Every time a user makes a swap within the pool, a commission (for example, 0.3%) is charged, which is distributed among all LPs proportionately. This mechanic is managed by automated market making (AMM) algorithms, like the model x*y=k in Uniswap v2, or more advanced curves in specialized protocols.

In addition to allowing efficient exchanges without intermediaries, liquidity pools serve as fundamental infrastructure for yield farming, collateralized loans, derivatives, algorithmic stablecoins and other DeFi strategies. However, they also introduce specific risks such as impermanent loss, vulnerabilities in contracts, or changes in the price ratio due to arbitration.

In short, liquidity pools replace the traditional order book model with a decentralized algorithmic system, making it possible for anyone in the world to provide liquidity and facilitate the operation of crypto markets without relying on centralized exchanges.

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