A liquidity pool (LP) is a smart contract that holds two tokens, such as USDC and AVAX tokens. Liquidity Pools are there to facilitate trading between the two tokens that are inside of the Liquidity Pool in place of regular Market Makers that would make trades on a centralised exchange. A decentralised exchange uses an automated market maker (AMM), which is an algorithm executed by smart contracts that completes swaps which are performed by users on the decentralised exchange. Anyone can deposit a pair of tokens into a liquidity pool, earning in return a percentage of the trading fees, proportional to their share of the pool. We explain more in depth in our medium article “The Mechanics of Liquidity Pools”