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