Decentralized finance (DeFi) has radically changed the trading landscape. The introduction of this ecosystem brought new channels of liquidity that are currently taking over the growing market. At the base of this system lie liquidity pools, which are key to making token trading on decentralized exchanges (DEXs) smooth and efficient. These liquidity pools create decentralized marketplaces where users can provide liquidity and generate profit by utilizing smart contracts and blockchain technology.
Unsurprisingly, just like it happens with any new concept, the emergence of liquidity pools has raised a ton of questions regarding the use, safety, reliability, profitability, and more. In this article, we’ll answer the most common ones.