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Liquidity pools enable decentralized exchanges by automating asset swaps with smart contracts.
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The constant product formula maintains pool equilibrium, stabilizing asset exchange rates.
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Traders pay slightly higher rates to liquidity pools, compensating providers and ensuring liquidity.
Liquidity pools are integral to decentralized finance (DeFi) applications like decentralized exchanges. At their core, liquidity pools are smart contracts that hold reserves of two assets and facilitate trading between them through automated market-making algorithms. By closely examining the key mathematical formulas and models underpinning liquidity pools, one can better understand how these revolutionary protocols function under the hood.
How Liquidity Pools Power Decentralized Exchanges
A liquidity pool contains reserves of two tokens, such as ETH and USDC. Liquidity providers deposit an equal value of both tokens into the pool to fund it. The asse
We współpracy z: https://www.thecoinrepublic.com/2023/10/02/exploring-liquidity-pools-a-mathematical-perspective/
