Liquidity pool

A smart-contract-based reserve of tokens used to facilitate trades on a decentralised exchange (DEX). Liquidity providers (LPs) deposit tokens into a pool and receive a claim on their share of the reserves, typically represented by fungible liquidity-provider tokens or, in concentrated-liquidity systems such as Uniswap v3, by an NFT. Some protocols hold reserves for multiple pools in a shared contract, with each pool distinguished by the protocol's internal accounting and transaction events.

Pool reserves are commingled, but swaps and liquidity deposits and withdrawals remain traceable on-chain. A swap's input and output transfers can generally be analysed as part of the same transaction, while liquidity-provider positions can be tracked through the associated tokens or NFTs and the relevant contract events.