#Liquidity101
Liquidity pools are a key part of DeFi, enabling token trades without traditional order books. On Binance, users can earn passive income by becoming liquidity providers (LPs)—depositing token pairs into pools and receiving a share of the trading fees.
🔍 What Are Liquidity Pools?
A liquidity pool is a collection of funds locked in a smart contract, which facilitates decentralized trading on automated market maker (AMM) platforms. These pools allow users to trade digital assets without relying on a centralized order book. Instead, liquidity is provided directly by users, known as liquidity providers (LPs), who contribute equal amounts of two different tokens to a pool. In return, LPs earn a share of the trading fees generated by the pool, proportional to their contribution.
🔢 Key Stats (June 2025)
- TVL on Binance Pools: Over $5 Billion
- Typical APY: Between 5% and 20%
- Pool Top:
BNB/USDT – High Volume and Low Slippage
ETH/BTC – Best for exposure to major cryptocurrencies
⚠️ Understanding Impermanent Loss
While providing liquidity can be profitable, it is essential to be aware of impermanent loss—a temporary loss of funds that occurs when the price of your deposited assets changes from when you deposited them. This phenomenon is inherent to liquidity pools and can affect returns.
⚠️ Understanding Impermanent Loss
While providing liquidity can be profitable, it is essential to be aware of impermanent loss—a temporary loss of funds that occurs when the price of your deposited assets changes from when you deposited them. This phenomenon is inherent to liquidity pools and can affect returns.
For a complete guide on how to get started with liquidity pools on Binance, visit the website.
#Cryptocurrency investments are subject to market risks. Always do your own research before participating in liquidity pools.
