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Glossary / Liquidity pool

Liquidity pool

A liquidity pool is a pot of two tokens locked in a smart contract that traders swap against. Depositors earn a share of fees.

Why it matters

A pool with little money in it is easy to manipulate and hard to exit.

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Related terms

Automated market maker (AMM)An AMM is a DEX design that prices tokens from a pool's balances instead of an order book.…LiquidityLiquidity is how easily you can buy or sell without moving the price much.…Impermanent lossImpermanent loss is the value a liquidity provider gives up compared with just holding, wh…

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Written by the VaultX AI team. Educational only, not investment advice.

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