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What is a Liquidity Pool in Blockchain? | ARMswap

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As the blockchain ecosystem evolves, liquidity pools have emerged as a cornerstone of decentralized finance (DeFi), enabling seamless trading on decentralized exchanges (DEXs). Instead of traditional order books, DEXs rely on liquidity pools (collections of cryptocurrencies or tokens locked in smart contracts) to facilitate transactions. These pools play a vital role in powering DeFi platforms, enabling activities like trading, lending, and yield farming in a trustless, decentralized environment. But what exactly are liquidity pools, how do they work, and why are they essential to DeFi? Let’s dive in.

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