What does "Pooling" mean

Providing liquidity to constant function market makers & earning proportional exchange fees in return.

Traditional Finance:

  • Most exchanges maintain an order book and facilitate matches between buyers and sellers.

  • For each successful match, traders are charged exchange fees which go directly to exchange operators.

The DeFi Difference:

  • Smart contracts hold liquidity reserves of various tokens, and trades are executed directly against these reserves.

  • Prices are set automatically using the constant product market maker mechanism, which keeps overall reserves in relative equilibrium.

  • Reserves are pooled between a network of liquidity providers who supply the system with tokens and receive a proportional share of transaction fees accrued.

  • IMPORTANT NOTE: With fluctuating prices, liquidity providers may incur “impermanent loss”.

Zapper helps you access the best pooling opportunities from a single interface: