How do LIQUIDITY POOLS work? (Uniswap, Curve, Balancer) | DEFI Explained

Liquidity pools, in essence, are pools of tokens that are locked in a smart contract. They are used to facilitate trading by providing liquidity and are extensively used by some of the decentralized exchanges a.k.a DEXes.
One of the first projects that introduced liquidity pools was Bancor, but they became widely popularised by Uniswap.
Curve realised that the automated market making mechanism behind Uniswap doesn't work very well for assets that should have a very similar price, such as stable coins or different flavours of the same coin, like wETH and sETH. Curve pools, by implementing a slightly different algorithm, are able to offer lower fees and lower slippage when exchanging these tokens.
The other idea for different liquidity pools came from Balancer that realised that we don't have to limit ourselves to having only 2 assets in a pool and in fact Balancer allows for as many as 8 tokens in a single liquidity pool.
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Bro how do you check a coins liquidity pool?

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[@Finematics]

Thanks!

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[@28annabel]

Currently, the only available pool to provide liquidity and stake ANY token is the “ANY/FSN” pool. However, Anyswap started recently to add coins and tokens from other blockchains, USDT and ETH are already available and paired with FSN in liquidity pools, with future plans to be paired with ANY too. Many coins are planned to be added in the near future: Bitcoin (BTC), Litecoin (LTC), Ripple (XRP), Cardano (ADA). Now, let’s picture the fact that each of these coins will be paired with ANY too. For each pool, huge amounts of ANY tokens will be needed to provide liquidity. This will lock a substantial number of ANY tokens in liquidity pools and, as a result, decrease the circulating supply of ANY. eng.ambcrypto.com/eleven-value-propositions-for-anyswaps-any-token/

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[@tarball2188]

My takeaway: there's 2 main models in exchanges, order book and automated market maker (AMM). Order book basically matches buy and sell orders continuously, and a lot of the liquidity actually comes from "market makers". AMMs on the other hand, don't match specific orders continuously, instead when you want to swap, you interact with a liquidity pool, which has a token pair. So it's like asynchronous vs synchronous swapping. When you swap, this changes the ratio of tokens in the LP, which in turn changes the price, due to supply and demand. So there is opportunity for arbitrage here. When you are a liquidity provider, you are depositing some tokens into a pool, and you earn a portion of the trading fees based on the amount you deposit.

[@Aeviae]

Thank you so much. You made it very easy to digest.

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Yesss

[@trevorphilips8756]

Suppose one token has liquidity pool of $10 million... But a person had $20 million of token value... Can the person sell their coin...???

[@JewTube001]

@@trevorphilips8756 no, it's completely impossible. in practice you would crash the price so you can't get the $20m. the number 20m is based on the market cap, which is not an account with funds in it but only an estimation of the total current value (which deflates as the asset is sold).

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[@Finematics]

thank you! :)

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wow, i finally understood how liquidity pools work after i watched ur video. Thank u so much

[@Finematics]

You're welcome! :)

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Awesome video! Really dig the whole concept of liquidity pools and decentralized exchanges, will watch more.

[@Finematics]

Thanks! :)

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[@favourmichael4002]

It's amazing how explanatory your video is, I really appreciate mate, I realized now that the grizzly hives which we refer to as liquidity pools are really beneficial, it's also amazing that the platform is easy to use and has no hitches. Thanks alot for this video man

[@favourmichael7891]

I had to Jot certain stuff from a notebook due to how informative your video is, man. Because of the grizzlyfi platform a for liquidity mining, I was also able to comprehend the idea of liquidity pools as hives, and that made so much sense to me. Their liquidity mining program is also quite simple for me to use because of how simple and clear the user interface is. Awesome video as always once more 👏

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Keep up the good work. These are great tutorials. Thank you.

[@alienzooband]

Very helpful and clear explanation thanks for taking the time to put this together

[@slpn1]

This is a great video. It would be ideal if you could add how it works when you want to leave the liquidity pool and what affect the slippage has on the value of the LP tokens.

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so far best video to explain liquidity pools and AMM I found

[@Finematics]

Thanks. Glad it was helpful!

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[@Finematics]

thank you!

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Hallo

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I love how explanatory your video is mate, had to takedown somethings on a notebook, great job. I've also been able to understand the concept of liquidity pools as hives, because of the grizzlyfi platform for liquidity mining and it made so much sense to me. for me it's also way easy to navigate their liquidity mining platform, the interface is so non-complex and easy to understand. thanks again man for this video.

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Very clear and informative video. You deserve a lot more viewers!

[@Finematics]

Thanks Timothy!

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What a great page and work you are doing! Thanks a lot!

[@Finematics]

Thanks. You're welcome! :)

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Wow! Amazing explanation! Thanks!

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Great easy to understand explanation of the differences and what liquidity pools are. Thanks. There are many videos that make this subject even more confusing. You asked what we want to hear next... Im interested in the insurance part of these concepts. Cant think of the project but i know its going to be big

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Thank you! There is a plan to make a video on the DeFi insurance with Nexus Mutual as an example.

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[@Finematics]

Thanks! You’re welcome :)

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i had to watch this a couple times. but i totally understand it now. plus after being in UBEswap for 2 weeks. i’m doing very well liquidity mining 🥳💪🏻

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I must say this video is best one explaining AMM, thanks.

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[@Finematics]

Hah, thank you! :)

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[@Finematics]

Thanks!

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Great way to explain. Thanks!

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Revisited this! Great video!

[@voyagerquant3479]

This was awesome. Thank you.

[@Hammer17592]

So adding to a liquidity pool is like buying an ETF with the two assets constantly being rebalanced to be 50% 50% while paying interest to hold onto this. This is amazing. Big things coming ahead for this concept, especially with balancer’s idea to have up to 8 tokens in a pool.

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I love the analogy to ETF's helps the concept click a little better

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You called it

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Awesome explanations, thanks!

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Brilliant tutorial on how LIQUIDITY POOLS work

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amazing!

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Great! Thanks for the sub! :)

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Thanks! Glad the videos were helpful :)

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[@Finematics]

You're welcome! :)

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Decrypted, indepth and easy .. THanks

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