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:
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