A liquidity pool is a reserve of liquidity locked in a smart contract and available to users and protocols of decentralised finance. These liquidity pools make it possible to exchange, lend and borrow funds available on them at any time and without a trusted third party.

They are the central element of the DeFi ecosystem. Anyone can contribute liquidity to a pool. In exchange, they receive an LP token that represents the asset(s) deposited in that pool.