rypto liquidity pools are a type of decentralized finance (DeFi) protocol that allows users to pool their cryptocurrency assets together and provide liquidity for a trading pair on a decentralized exchange (DEX).
Basic liquidity pools, such as those used by Uniswap, use a constant product market maker algorithm that ensures the product of their supplied tokens is always the same. Furthermore, due to this algorithm they can provide liquidity regardless of trade size and ensure it will be there for future trades. This happens because no matter how much people want or don’t need in total; supply increases with demand which makes price increase automatically so users trust its stability while trading off-chain making them more likely to hold on token instead sell at lower prices than waiting hours/days until next refill opportunity occurs again (when possible).