Definition ∞ DeFi liquidity pools are collections of cryptocurrency tokens locked within smart contracts, serving to facilitate decentralized trading and lending. These pools provide the necessary capital for automated market makers (AMMs) and other decentralized finance protocols. They enable users to exchange assets without relying on traditional order books.
Context ∞ These pools are a foundational component of the decentralized finance ecosystem, enabling the operation of various financial services without intermediaries. They are frequently discussed in crypto news concerning yield generation, impermanent loss, and the overall health of decentralized exchanges. Their growth is a key indicator of DeFi adoption.
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