What is a liquidity pool in DeFi? A liquidity pool is a collective pool of cryptocurrency assets that are locked in a smart contract, allowing for the creation of a decentralized exchange (DEX). By providing liquidity, users can earn a share of the trading fees generated by the pool, making it a popular way to earn passive income in the DeFi space.

Liquidity pools play a crucial role in decentralized finance by enabling efficient trading and generating passive income for users. It's important to understand the risks and rewards before participating in such pools to make informed decisions.