👀What is liquidity?

Liquidity refers to the availability of assets in a trading pool that enables smooth and instant transactions.

It's about how quickly you can convert your crypto into cash or another crypto without causing big price changes. High liquidity means you can trade easily, while low liquidity means it might be harder to buy or sell without changing the price a lot.

A liquidity pool is a smart contract holding funds that facilitate trades between different tokens. When users provide liquidity to a pool, they deposit tokens (e.g., $USDT, stablecoins or other assets) into this pool.

This pool then allows traders to buy and sell assets quickly without the need for an order book, reducing slippage and making the trading experience seamless.

People who provide these assets to the liquidity pool are called liquidity providers (LPs). They earn a small fee from each trade that happens in the pool as a reward for their contribution. This helps make trading smoother, as there's always enough of each asset for people to swap between.

To summarize:

• Liquidity = How easily you can buy or sell an asset.

• Liquidity pool = A shared pool of crypto assets that makes trading easier on decentralized exchanges.