# Liquidity Pools

### What are Liquidity Pools

In traditional markets, liquidity is defined as “the availability of liquid assets to a market or company; liquid assets; cash.” Another way to think about liquidity is the degree to which an asset can be bought or sold in the market without affecting its price.

Liquidity pools are an innovation within the blockchain industry and a vital part of decentralized finance (DeFi). They are smart contracts containing tokens supplied by the platform’s users. 

A liquidity pool comprises a pair of tokens, token A and token B. We can also say that token A is paired with token B. When someone trades between tokens A and B on a decentralized exchange (DEX), they rely on tokens in the A/B liquidity pool. When someone buys token B, there are fewer B tokens in the liquidity pool, increasing the price of token B.

### Creating a Liquidity Pool

**Step 1: Update Transferability**

You change your token from having limited transferability to [fully transferable via the](https://p00ls.gitbook.io/p00ls-v2/p00ls-creator-tokens/transferability/making-your-token-fully-transferable)

[Creator Portal. ](https://p00ls.gitbook.io/p00ls-v2/p00ls-creator-tokens/transferability/making-your-token-fully-transferable)

<figure><img src="/files/i6puULSULlzo2COtqkSI" alt=""><figcaption></figcaption></figure>

**Step 2: Head to Uniswap**

* Go to [Uniswap](https://app.uniswap.org/) to easily create a pool for your token
* Uniswap [provides instructions](https://support.uniswap.org/hc/en-us/articles/20904040289037-How-to-provide-liquidity-on-the-Polygon-Network) for how to set up a pool with your token

<figure><img src="/files/I8WGgxH8zyTUwLkAXIyE" alt=""><figcaption></figcaption></figure>

**Step 3: Tell Your Community!**

* Once you've completed setting up your pool on Uniswap, you're ready to start trading your token!&#x20;
* **Remember:** Creating token utility is the best way to encourage engagement with your community and your liquidity pool.&#x20;


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://p00ls.gitbook.io/p00ls-v2/p00ls-creator-tokens/liquidity-pools.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.