Liquidity pool
LPpool
A pool of token reserves that a smart contract uses to facilitate swaps, lending, or other on-chain activity.
In an AMM (automated market maker), LPs deposit pairs (or singles) of tokens and earn fees + incentives. In a Lending market, suppliers contribute to a single-asset pool that borrowers draw against. Pool depth, concentration, and asset correlation are the primary risk inputs.
Related terms
- AMM (automated market maker)A smart contract that prices assets via a pricing curve over a pool of reserves rather than an order book.
- LP tokenA receipt token representing a share of an AMM liquidity pool — claims a pro-rata fraction of pool reserves.
- Concentrated liquidityAMM design where LPs allocate liquidity to a chosen price range, increasing capital efficiency vs. constant-product.