🌀 Liquidity Pooling. Part 2

👾What Are The Risks of Liquidity Pools?

While the liquidity pool model deployed by DEXes protects you from traditional counterparty and custodial risk, funds are still deposited to a pool that is effectively a temporary custodian of those funds, albeit a contract rather than an entity. If that smart contract is subject to bugs, failure, hacks, or exploits, funds can still be lost. Care must also be taken to avoid platforms with an admin key or other privileged access that can leave users vulnerable to rug pulls and exit scams. This risk is common across all decentralized platforms, of course, and not just limited to liquidity pools.

💰Why Do People Use Liquidity Pools?

Liquidity pools enable anyone to provide liquidity using an automated smart contract and take advantage of new decentralized trading and reward generation opportunities with no KYC, no capital restrictions, and no intermediary.

🧠 Capturing the Potential Of Decentralized Finance

Liquidity pooling has fast become a core element of the defi ecosystem, powering various use cases from AMM DEX platforms, to liquidity mining, yield farming, governance, lending protocols, liquid staking, synthetic asset minting, smart contract insurance, tranching, and more.

EXACVO is a company of independent financial analysts, traders, IT — developers. TOP-1 Trader by Tradingview.com Our DeFi project EXCAVO.FINANCE — AMM