DeFi is not an uncommon term in the current financial system due to its growing impacts on the financial market. It provides solutions to the limitations of traditional finance. It encourages an open and decentralized financial transaction that won’t depend on intermediaries, like banks, insurers, brokerages, or stock exchanges. Instead, it allows the use of decentralized networks to provide services to users. Despite the fact cryptocurrency allows decentralized transactions, it is faced with the same challenges that it has always avoided; intermediaries! So, this brought about the emergence of DeFi liquidity pools. We understand that some people are not familiar with DeFi, liquidity pool, and how it works. This article will provide a simple guide to liquidity pool token and liquidity staking programs. What Factors Determine DeFi Liquidity Pool? The aim of DeFi is to ensure open finance and exclude middlemen from any sort of transactions done and that includes; loans and insurances. It seeks to enhance flexibility when buyers and sellers carry out transactions. However, liquidity has always been a major constraint of cryptocurrency and blockchain. This brought about the emergence of the DeFi liquidity pool. DeFi liquidity pool is modeled on a ‘smart contract’ which allows buyers and sellers to execute transactions and determine prices in order to achieve fairness. It supports DeFi by making it convenient and ...
