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Liquidity Pool

A “liquidity pool” style smart contract is one that holds balances of two or more unique tokens. In exchange for fees and protocol rewards, users called Liquidity Providers (LPs) send their tokens to a given pool contract. This enables other users to swap between those assets. To keep track of their positions, LPs receive LP tokens (a sort of “IOU” token), which can either be ERC-20 or ERC-721 depending on the protocol.

Note: These are non-technical definitions meant for a general audience and should not be used as legal definition
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