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Liquidity pool

A liquidity pool is a pool of funds contributed by users that are used to facilitate trades on a decentralized exchange (DEX). In a liquidity pool, users deposit equal amounts of two different cryptocurrencies, which are used to create a market for those tokens. The price of the tokens in the pool is determined by an algorithm that maintains a balance between the two tokens based on supply and demand.

In exchange for providing liquidity to the pool, users receive a portion of the trading fees generated by the exchange.