What Is Liquidity Pool?

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In this video on What is Liquidity Pool? will help you understand all its related concepts from basics to advance. it will help you understand what is Liquidity Pool and how it works in Decentralized Finance or DeFi in Blockchain Technology. It will give you an idea how Liquidity Pool works and how it helps for modernizing traditional financial systems. It will give you an idea on how it differs from ordered books format in Blockchain. In this video, you will learn: 00:00 Introduction To Liquidty Pool 01:26 What Is DeFi? 02:14 What Is Liqudity Pool? 02:53 Liquidity Pool vs. Ordered Book 04:03 How Liquidity Pool Work? 05:32 Regulations of Liquidity Pool 06:15 Pros and Cons of Liquidity Pool What Is DeFi? Decentralized finance (DeFi) is a new financial system that is built on safely distributed ledgers, much like the ones used by cryptocurrencies. DeFi reduces the service charges that banks and other financial institutions impose. Anyone with an internet connection can use DeFi, and users can hold their money in a safe digital wallet and transfer money quickly. Basically, By giving people access to peer-to-peer digital trades, DeFi threatens the centralized financial system. And Crypto assets are "locked" into the contracts, referred to as liquidity pools, by users of DeFi protocols so that others can use them. What Is Liquidity Pool? A liquidity pool is technically a pool of crypto tokens secured under a smart contract. And these tokens provide decentralized exchanges with the necessary liquidity they require. Basically, the term "liquidity" refers to the ease with which one can swap a crypto token for another. Because so many financial transactions occur within the DeFi ecosystem, such simplicity is crucial. 🔥 Free Blockchain Developer Course with Completion Certificate: https://www.simplilearn.com/learn-blo... ✅Subscribe to our Channel to learn more about the top Technologies: https://bit.ly/2VT4WtH ⏩ Check out the Blockchain training videos: https://www.youtube.com/watch?v=yubzJ... #WhatIsLiquidityPool #LiquidityPool #LiquidityPBlooolExplained #ckchain #BlockchainTutorial #BlockchainTraining #Blockchain #BlockchainTutorialForBeginners #BlockchainDeveloper #Blockchain2023 #2023 #Simplilearn To know about cryptocurrency and Blockchain, visit: https://www.simplilearn.com/blockchai... Watch Top Trending Videos From Simplilearn: ⏩Top 10 Programming Languages in 2023: https://youtu.be/Q2u3llawnvc ⏩Top 10 Certifications for 2023: https://youtu.be/S6yadRofCsM ⏩Top 10 Highest Paying Jobs in 2023: https://youtu.be/9tL1m9MXaXQ ⏩Top 10 Dying Programming Languages: https://youtu.be/51mUwZ6J2D4 ⏩Top 10 Technologies to Learn in 2022: https://youtu.be/IrgGmaeYmdM Why learn Blockchain? Blockchain technology is the brainchild of Satoshi Nakamoto, which enables digital information to be distributed. A network of computing nodes makes up the Blockchain. Durability, robustness, success rate, transparency, incorruptibility are some of the entic

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TOPICS TO EXPLORE
What Is DeFi?
What Is A Liquidity
Pool?

TOPICS TO EXPLORE
What Is DeFi?
What Is A Liquidity
Pool?
Liquidity Pool
vs.
Order Books

TOPICS TO EXPLORE
What Is DeFi?
What Is A Liquidity
Pool?
Liquidity Pool
vs.
Order Books
How Do
Liquidity Pools
Work?

TOPICS TO EXPLORE
What Is DeFi?
What Is A Liquidity
Pool?
Liquidity Pool
vs.
Order Books
How Do
Liquidity Pools
Work?
Regulations Of
Liquidity Pools

What Is DeFi?
Decentralized finance or DeFi is a technology that eliminates intermediaries by allowing people, merchants, and
businesses to conduct financial transactions through emerging technology
Intermediaries
People, Merchants
and Businesses
Decentralized Finance
Financial Transactions

What Is A Liquidity Pool?
Liquidity pools are a mechanism by which users can pool their assets in a DEX's smart contracts to provide asset
liquidity for traders to swap between currencies
Users
Digital Assets
Smart Contract
Swap Between Currencies
LIQUIDITY POOL

Liquidity Pool vs. Order Books
The ordered book and the matching engine are the primary components of any centralized exchange(CEX)
USER ID - C
ORDER ID - C
FUND - 300 $
STAKE - 30
USER ID - B
ORDER ID - B
FUND - 200 $
STAKE - 20
USER ID - A
ORDER ID - A
FUND - 100 $
STAKE - 10
Order Of Funds
Ordered Book Stored In
Blockchain

Liquidity Pool vs. Order Books
Liquidity Pools carries out deals directly on the blockchain without needing a central entity to retain the funds
USER ID - C
ORDER ID - C
FUND - 300 $
STAKE - 30
USER ID - B
ORDER ID - B
FUND - 200 $
STAKE - 20
USER ID - A
ORDER ID - A
FUND - 100 $
STAKE - 10
Order Of Funds
Ordered Book Stored In
Blockchain
Orders are directly stored in
the Blockchain

How Do Liquidity Pools Work?
An average liquidity pool encourages and pays users for staking their digital assets in the pool. In exchanges where
they pool their assets, rewards may be received in the form of cryptocurrency or as a portion of trading commissions
Digital Assets
Crypto Rewards
Liquidity Pool
Users

How Do Liquidity Pools Work?
Step 1: Go to SushiSwap

How Do Liquidity Pools Work?
Step 1: Go to SushiSwap
Step 2: Find the BTC-
USDT liquidity pool

How Do Liquidity Pools Work?
Step 1: Go to SushiSwap
Step 2: Find the BTC-
USDT liquidity pool
Step 3: Deposit money to the
BTC-USDT liquidity pool

How Do Liquidity Pools Work?
Step 1: Go to SushiSwap
Step 2: Find the BTC-
USDT liquidity pool
Step 3: Deposit money to the
BTC-USDT liquidity pool
Step 4: Receive BTC-USDT
liquidity provider tokens

Regulation Of Liquidity Pools
To build a pool, the investment fund manager needs a license. A license for an investment fund is also required,
regardless of the jurisdiction, wherever the pool is actively offered or promoted to clients
Liquidity Pool
Fund Manager
License

Pros And Cons Of Liquidity Pools
Cons
Pros
Trades are executed at current market prices,
simplifying DEX trading
Decentralization is opposed by the fact that a small
group controls the pool of wealth

Pros And Cons Of Liquidity Pools
Pros
Trades are executed at current market prices,
simplifying DEX trading
Decentralization is opposed by the fact that a small
group controls the pool of wealth
Allows users to supply liquidity and get rewards
keeps security audit information open using publicly
accessible smart contracts
Possibility of frauds like rug pulls and exit scams
The possibility of temporary loss
Cons

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