All terms
All termsAddressBlockBlock timeBlockchainConfirmationGasGweiHashMempoolNodePrivate keyPublic keySeed phraseTransactionWalletAll time high (ATH)Bear marketBull marketCandlestickCapitulationChart patternsDollar cost averaging (DCA)Funding rateLeverageLimit orderLiquidationLiquidityMarket capMarket orderOrder bookPosition sizingRisk managementSlippageSpreadSupport and resistanceTrendVolatilityVolumeWhaleAMMBridgeCEXDAODeFiDepegDEXFlash loanGovernance tokenImpermanent lossLiquidity poolLP tokenOraclePerpetual (perp)RestakingRWAStablecoinTVLWrapped tokenYield farmingAirdropAlphaApe inBagholderDegenDiamond handsFloor priceFOMOFUDGMHODLMaxiMeme coinMoonNFTNGMINormiePaper handsPFPRektShillSnapshotWAGMIAddress poisoningCold storageCustodyDue diligence (DYOR)Dusting attackExit scamFront runningHardware walletHoneypotHot walletMEVMultisigPhishingPump and dumpRug pullSandwich attackSelf custodySIM swapToken approvalTwo factor authenticationWallet drainerWash tradingAccount abstractionAppchainBlock explorerCirculating and total supplyConsensusData availabilityEVMFaucetFinalityForkFully diluted valuation (FDV)Gas warHalvingLayer 1Layer 2Layer 3MainnetMiningName serviceOptimistic rollupProof of stakeProof of workRollupShardingSidechainSlashingSmart contractStakingTestnetToken standardTokenomicsValidatorZero knowledge proofZK rollupArweave and the permawebComposabilityCross chain messagingdAppDecentralized identity (DID)DePINGameFi and play to earnIndexerInteroperabilityIPFSOnchain and offchainSession keysSmart accountSocialFiSoulbound tokenSybil resistanceToken gatingWeb2 vs Web3Web3
Definition
A shared pot of two tokens that traders swap against.
Liquidity providers deposit both assets in a pair and receive LP tokens representing their share. Traders swap against the pool and pay a fee, which accrues to the providers.
Providing liquidity is not passive income without risk. If the two assets move apart in price, you can end up worse off than simply holding them.
In practice
Deposit ETH and USDC into a Uniswap pool and you earn a cut of every swap between them, proportional to your share.
Where to go next
AMMAn automated market maker, which prices trades with a formula instead of an order book.Impermanent lossThe gap between providing liquidity and simply holding the two assets.LP tokenA receipt proving your share of a liquidity pool.Yield farmingMoving capital between protocols to chase the highest available return.
More defi terms
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