{"id":11362,"date":"2024-04-22T09:56:10","date_gmt":"2024-04-22T09:56:10","guid":{"rendered":"https:\/\/www.sos.cryptobel.be\/docs\/how-defi-works\/what-is-a-liquidity-pool\/"},"modified":"2025-02-05T14:50:00","modified_gmt":"2025-02-05T14:50:00","slug":"what-is-a-liquidity-pool","status":"publish","type":"docs","link":"https:\/\/www.sos.cryptobel.be\/en\/docs\/faq-web3\/decentralized-finance-defi\/how-defi-works\/what-is-a-liquidity-pool\/","title":{"rendered":"What is a liquidity pool?"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">A <strong>liquidity pool<\/strong> in the DeFi context is a mechanism where users <strong>make their cryptos available to facilitate trading on decentralized platforms<\/strong>, thus contributing to the <strong>liquidity of the decentralized market<\/strong>, but before they can do this, they must first <a href=\"https:\/\/www.sos.cryptobel.be\/en\/docs\/faq-web3\/web3-security\/software-portfolio-installation\/\" data-type=\"link\" data-id=\"https:\/\/www.sos.cryptobel.be\/docs\/faq\/securite-web3\/installation-portefeuille-logiciel\/\">have a software wallet <\/a>. In return, <strong>they receive rewards<\/strong> in the form of additional fees or tokens. <\/p>\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><strong>In fact, these<\/strong> <strong>liquidity pools<\/strong> <strong>work a bit like bureaux de change. <\/strong>That is, to participate, you need to have crypto-currencies in both currencies involved. This is why we speak of PAIR between <strong>USDC\/BTC, USDT\/ETH<\/strong> or other examples with <strong>SOL\/USDC<\/strong>. So you need to have enough in both currencies to be able to offer liquidity for people trading in both currencies.  <\/p>\n<\/blockquote>\n\n<p class=\"wp-block-paragraph\">There are, of course, central players known as market makers (official bureaux de change), who provide millions or even billions in liquidity for the announced peers. Either it&#8217;s millions of people offering a large pile of money to be exchanged between the two parties, or it&#8217;s large players (state-owned or otherwise) with lots of money offering the large pile of money. Trading platforms are also based on this principle.  <\/p>\n\n<p class=\"wp-block-paragraph\"><strong>And like any bureau de change, it pays in exchange fees between the two.<\/strong><\/p>\n\n<figure class=\"wp-block-image size-large is-resized\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"578\" src=\"https:\/\/www.sos.cryptobel.be\/wp-content\/uploads\/2024\/04\/image-6-1024x578.png\" alt=\"\" class=\"wp-image-9925\" style=\"width:950px;height:auto\" srcset=\"https:\/\/www.sos.cryptobel.be\/wp-content\/uploads\/2024\/04\/image-6-1024x578.png 1024w, https:\/\/www.sos.cryptobel.be\/wp-content\/uploads\/2024\/04\/image-6-300x169.png 300w, https:\/\/www.sos.cryptobel.be\/wp-content\/uploads\/2024\/04\/image-6-768x433.png 768w, https:\/\/www.sos.cryptobel.be\/wp-content\/uploads\/2024\/04\/image-6-20x11.png 20w, https:\/\/www.sos.cryptobel.be\/wp-content\/uploads\/2024\/04\/image-6-32x18.png 32w, https:\/\/www.sos.cryptobel.be\/wp-content\/uploads\/2024\/04\/image-6-270x152.png 270w, https:\/\/www.sos.cryptobel.be\/wp-content\/uploads\/2024\/04\/image-6.png 1072w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>A liquidity pool in the DeFi context is a mechanism where users make their cryptos available to facilitate trading on decentralized platforms, thus contributing to the liquidity of the decentralized market, but before they can do this, they must first have a software wallet . In return, they receive rewards in the form of additional [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"parent":11357,"menu_order":39,"comment_status":"open","ping_status":"closed","template":"","doc_tag":[],"class_list":["post-11362","docs","type-docs","status-publish","hentry","no-post-thumbnail"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What is a liquidity pool? - SOS Cryptobel<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.sos.cryptobel.be\/en\/docs\/faq-web3\/decentralized-finance-defi\/how-defi-works\/what-is-a-liquidity-pool\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What is a liquidity pool? - SOS Cryptobel\" \/>\n<meta property=\"og:description\" content=\"A liquidity pool in the DeFi context is a mechanism where users make their cryptos available to facilitate trading on decentralized platforms, thus contributing to the liquidity of the decentralized market, but before they can do this, they must first have a software wallet . 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