Liquidity Pool Explained

A liquidity pool is similar to crowdfunding; the basic concept is to pool assets in cryptocurrencies or tokens locked in through smart contracts. This pool then provides liquidity and facilitates faster transactions on a decentralized platform. Liquidity pools play an important role in the Defi ecosystem and are essential in yield farming and blockchain online gaming.

Liquidity pools incentivize crypto users on different protocols, called liquidity providers (LPs). Liquidity providers are rewarded with a fraction of fees and incentives, equivalent to the liquidity they have supplied to the pool; these are referred to as liquidity provider tokens (LPTs). LP tokens are used in different ways on a DeFi network. There are many ways liquidity providers earn rewards for providing liquidity with LP tokens, including yield farming and, in some instances, governance rights.

Lunabets.io has its own House Pool, which enables users to deposit crypto funds and bankroll betting activities, earning a share of platform revenue as rewards. In addition, LunaFi further incentivizes LPs by allowing them to earn yield farming rewards.