Liquidity Pools: How They Work and How Users Earn

Liquidity pools are the backbone of decentralized finance (DeFi), allowing users to trade crypto assets without needing a traditional buyer or seller. These pools are smart contract-based reserves of two or more tokens, such as ETH/USDC, locked by users (called liquidity providers) into a decentralized exchange (DEX) like Uniswap or PancakeSwap.

When someone wants to swap tokens, the DEX pulls from the pool to complete the trade. In return for supplying liquidity, providers earn a portion of the trading fees, typically proportional to the amount they've contributed to the pool. This creates an opportunity for passive income, as long as you manage risks like impermanent loss and token volatility.

Liquidity pools support smooth, instant trading in DeFi platforms by ensuring there’s always available capital. The more liquidity a pool has, the better the trading experience with lower slippage.

Now, let’s talk about $WCT . If you’re posting educational content about crypto on Binance Square, especially DeFi and liquidity pools, tagging $WCT and providing market insights can qualify you for up to 100% bonus commission in $WCT token vouchers. You don’t need to trade—just create quality content, share your knowledge, and get rewarded in return.

#DeFiEducation