Liquidity

The ease with which an asset can be converted to cash or other assets without affecting its market price. In cryptocurrency and DeFi contexts, liquidity refers to the availability of funds for trading and the depth of order books. High liquidity enables smooth trading and stable prices, while low liquidity can cause significant price slippage. Liquidity provision is incentivized in DeFi protocols through rewards, making it a key component of decentralized finance ecosystems.