# Liquidity Pool

A liquidity pool is created when assets are locked in a smart contract for the purpose of providing liquidity. It uses Automated Market Makers (AMMs) / smart contracts to match buyers and sellers with set-price.

It is essential to have a continuous flow of liquidity — demand and supply of NFT — so that trades can happen continuously and efficiently, and liquidity providers are incentivized (with trading fees or profiting from bid-ask spread) by providing assets.

There are various kinds of liquidity pools to choose from on Collection.xyz, depending on the inventory and objective of the liquidity provider:

<table data-view="cards"><thead><tr><th></th><th></th><th></th><th data-hidden data-card-target data-type="content-ref"></th></tr></thead><tbody><tr><td><mark style="color:blue;"><strong>Advanced Pool</strong></mark></td><td>Liquidity providers can now specify the group of NFTs they want to trade against. Liquidity providers can set up pools for specific attributes, token IDs, rarity, hotlists and more!</td><td></td><td><a href="liquidity-pool/advanced-pool">advanced-pool</a></td></tr><tr><td><mark style="color:blue;"><strong>Basic Pool</strong></mark></td><td>Liquidity providers can set up pools that trade against the entire collection.</td><td></td><td><a href="liquidity-pool/basic-pool">basic-pool</a></td></tr></tbody></table>