What is Liquidity Pool?
A liquidity pool is a smart contract that holds reserves of two or more tokens, allowing users to trade against the pool and liquidity providers to earn a share of trading fees. Pools are the foundation of AMM-based DEXs.
Why Liquidity Pool matters
Understanding Liquidity Pool is part of building a solid mental model of how Bitcoin, blockchain and Web3 systems actually work. Concepts in the Ethereum category sit at the foundation of the broader stack — get them right and the rest is far easier.
Learn this interactively
Reading the definition is a start. ZeroToBlock teaches concepts like Liquidity Pool through hands-on, browser-based simulations. Build the mental model by actually using it:
- Bitcoin 101 — interactive fundamentals course
- Bitcoin Proof of Work — mining, hashing and consensus
- Browse all interactive blockchain courses
Related terms
- AMM (Automated Market Maker) — A pricing formula that replaces order books.
- DEX (Decentralized Exchange) — A smart-contract-based trading protocol.
- Yield Farming — Earning rewards by deploying capital across DeFi protocols.
More ethereum terms
- DeFi (Decentralized Finance) — Financial services built from smart contracts.
- Ethereum — A programmable blockchain that supports smart contracts.
- EVM (Ethereum Virtual Machine) — The execution environment for Ethereum smart contracts.
- Gas — The unit measuring computational cost on Ethereum.
- NFT (Non-Fungible Token) — A unique, non-interchangeable token on a blockchain.
- Smart Contract — Code on a blockchain that automatically enforces its rules.
- Solidity — The most popular programming language for Ethereum smart contracts.
- Web3 — An umbrella term for blockchain-based, user-owned internet applications.
Keep exploring
Continue with the full blockchain glossary — 136 terms in total — or read the developer blog and FAQ for deeper context.