The term “pool” in cryptocurrency generally refers to a collective mining effort where multiple miners combine their computational power to increase the probability of successfully mining a block and earning the associated cryptocurrency reward. This is known as a “mining pool.”
The primary benefit of a mining pool is that it allows miners with less powerful hardware to participate in the mining process and earn rewards. Instead of trying to mine a block on their own (which could take years with less powerful hardware), they contribute to a collective effort that is more likely to mine blocks regularly. The rewards are then distributed among the members of the pool based on the amount of computational power each contributed.
In the context of DeFi (Decentralized Finance), a “pool” can also refer to a liquidity pool. These are smart contracts that contain funds used for trading in a decentralized exchange (DEX). Liquidity providers deposit an equal value of two tokens to create a market. In return for providing liquidity to the pool, they get LP (Liquidity Provider) tokens, which can be used to claim their share of the pool, or stake in a farm to earn more tokens.
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