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Liquidity Pool

A liquidity pool in crypto is a collection of funds (usually in the form of cryptocurrency) that is used to provide liquidity for trading pairs on a decentralized exchange (DEX).

The funds in the pool are supplied by liquidity providers who earn a share of the trading fees in return for their contribution. The liquidity pool allows traders to buy and sell the assets in the pool with less slippage and at a more stable price. It is different from traditional exchange, where the order book is centralized and maintained by the exchange itself.