Swaps and Liquidity Pools

Swapping and Liquidity Pools are the core fundamentals of DeFi. Token Swaps are a method of trading tokens on the Cardano Network using an AMM (Automated Market Maker) and Liquidity Pools. Swapping is the act of instantly trading tokens for tokens. The following explanation is for AMM DExes, not Order Book DExes. In order to swap, we first need Liquidity. This is done by users providing both sides of the pair to the platform. The user is incentivized via a share of the fees. This is further explained in our Pools section. When a swap occurs, the AMM will perform the sale to the system. The user is effectively buying from, or selling to, the decentralized liquidity pool. To learn more about how to execute a swap, visit our How to: Trade section.