Liquidity Pool (Perp Dex)
A pool of digital assets provided by users to facilitate trading on a Perp DEX.
What is Liquidity Pool (Perp Dex)?
A liquidity pool in a Perp DEX is a collection of digital assets, typically stablecoins or major tokens like ETH, deposited by liquidity providers to enable trading and leverage for perpetual swaps. For example, GMX’s GLP pool combines assets like BTC, ETH, and USDC, which traders borrow against for leveraged positions, with profits and losses settled against the pool.
Liquidity providers earn fees from trading activity and funding rates but face risks like impermanent loss or losses from liquidations if the pool cannot cover defaults. Unlike traditional AMMs, Perp DEX liquidity pools are designed for derivatives trading, often using smart contracts to manage funds transparently. Providers can stake or unstake assets, with returns varying based on market activity and pool performance.
Related Terms
Slot in Ethereum
A 12-second time interval in a proof-of-stake blockchain where a validator can propose a new block of Ethereum, which may remain empty if no block is proposed.
Margin
The collateral or initial investment required to open and maintain a leveraged trading position in digital asset markets, amplifying potential profits and losses.
Multi-Hop Swap
A DEX trade that routes through multiple liquidity pools or token pairs to achieve the desired swap, optimizing price and reducing slippage.
Message Call
The process of transferring data or instructions from one account to another on the Ethereum blockchain, triggering execution of associated code in the Ethereum Virtual Machine (EVM).
Market Order
An order to buy or sell an asset immediately at the best available current price.
MEV
The maximum profit validators can extract from Ethereum block production by reordering, including, or excluding transactions, beyond base rewards and gas fees.