> For the complete documentation index, see [llms.txt](https://docs.sinfonia.zone/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.sinfonia.zone/products/exchange/fantoken-liquidity-pools.md).

# FanToken Liquidity Pools

A liquidity pool is a digital pile of cryptocurrency locked in a smart contract. This results in creating liquidity for faster transactions.

A major component of a liquidity pool are [**AMMs**](/products/exchange/amm.md)**.**\
In other words, users of an AMM platform supply liquidity pools with tokens, and the price of the tokens in the pool is determined by a mathematical formula of the AMM itself.\
\
Liquidity pools are also essential for [**yield farming**](/yield-farming.md) and blockchain-based different types of gamification.

Liquidity pools are designed to incentivize users of different crypto platforms, called liquidity providers (LPs). After a certain amount of time, LPs are rewarded with a fraction of fees and incentives, equivalent to the amount of liquidity they supplied, called liquidity provider tokens ([**LPTs**](/yield-farming/lp-tokens.md)).

Trades with liquidity pool programs like [**Sinfonia**](https://app.sinfonia.zone/pools) don't require matching the expected price and the executed price. AMMs, which are programmed to facilitate trades efficiently by eliminating the gap between the buyers and sellers of crypto tokens, make trades on DEX markets easy and reliable.


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