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MoonPay (UK) Limited is a company registered in England and Wales under the company number 12055543. MoonPay (UK) Limited's office address is 20-22 Wenlock Road, London, N1 7GU.
MoonPay (UK) Limited is registered with the Financial Conduct Authority, under FRN 944716 as cryptoasset business, under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, as amended (MLRs).

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Liquidity pools

Liquidity pools are funds of crypto used to facilitate trades.

Geoffrey Lyons

By Geoffrey Lyons

Published on Nov 22, 2024

Last modified on Feb 26, 2026

Liquidity pools are funds of crypto used to facilitate trades.

They play an essential role in the operations of crypto marketplaces that don’t have a central body coordinating transactions, also known as decentralized exchanges.

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“Liquidity” + “pool”

In a liquidity pool, crypto is pooled together by various people. This crypto is then used by a decentralized exchange (DEX) as a source of liquidity.

Liquidity is the ready availability of tradable assets. You can think of it as a measure of how easy it is to complete trades on a marketplace.

Imagine Lisa is an exotic fruit trader who attends three fruit markets with varying degrees of liquidity:

Screenshot 2024-11-22 at 12.50.38.png

It takes two to tango

Liquidity pools are typically stocked with two cryptocurrencies or “trading pairs”, which provide liquidity for anyone who wants to swap one for the other. For example, a liquidity pool might contain Ethereum (ETH) and Tether (USDT), or Solana (SOL) and USD Coin (USDC).

What if someone wants a coin that isn’t part of a trading pair? Most DEXs will link different liquidity pools together in order to facilitate this.

Diving in

Let’s see how a liquidity pool works in action.

Screenshot 2024-11-22 at 12.51.50.png

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