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What is liquidity pool farming. In some platform LP can earn multiple tokens that they can then be added to the Liquidity Pool to get more reward. The Liquidity Pool is the smart contract that contains funds. They are used to facilitate trading by providing liquidity and are extensively used by some of the decentralized exchanges aka DEXes.

Once youve added your funds to a pool youve officially become a liquidity provider. How does Liquidity Pool Works. The first step in yield farming involves adding funds to a liquidity pool which are essentially smart contracts that contain funds.

Understanding Liquidity Yield farming Staking in Defi. Decentralized exchanges are the main product of the DeFi market and in order to facilitate trades they rely on investors who are willing to assist them in this matter. Basically in a created pool of two assets the liquidity is going to move around as users borrow lend and withdraw assets from it.

Yield farming is the practice of staking or lending crypto assets in order to generate high returns or rewards in the form of additional cryptocurrency. Most AMM and liquidity pool uses the constant product formula which is x y k. X and y represents the respective token balance of a pairing and k is a constant that will never change.

Liquidity pools are clearly explained in this lesson. As a reward you are entitled to your share of all fees earned by this pool. Staking pools are for any coin that requires Proof of Stake for block verification.

The crypto users who stake or store their assets in these liquidity pools to yield more assets or income through the concept of DeFi Yield Farming are known as liquidity. Liquidity Providers get rewards for adding funds to the pool and the rewards may came from the fees generated by the underlying DeFi platform or from other source. Complex Yield Farming Made Easy.