> For the complete documentation index, see [llms.txt](https://docs.collection.xyz/guides/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.collection.xyz/guides/collection-concepts/liquidity-pool.md).

# 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="/pages/mdmiyyTIuUT1IP1hgSkB">/pages/mdmiyyTIuUT1IP1hgSkB</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="/pages/rkLjbmb9UgS1PDhGhzxH">/pages/rkLjbmb9UgS1PDhGhzxH</a></td></tr></tbody></table>