Pooled Liquidity

Definition ∞ Pooled liquidity refers to the aggregation of assets from multiple participants into a shared pool, typically managed by smart contracts. This collective pool provides the necessary depth for trading or lending operations within decentralized finance platforms. By concentrating assets, it facilitates more efficient price discovery and execution of transactions.
Context ∞ Pooled liquidity is a foundational element of decentralized exchanges (DEXs) and lending protocols, directly impacting trading costs and the availability of capital. Current discussions frequently focus on the strategies for incentivizing liquidity providers, the risks associated with impermanent loss, and the ongoing development of automated market maker (AMM) designs that optimize capital efficiency and reduce slippage.