What is Liquidity pool?

A smart contract holding reserves of two tokens that lets people trade against it, with prices set by the ratio of the reserves.

How it works

Instead of matching buyers and sellers, a DEX uses a pool. The product of the two reserves stays constant, so buying one token pushes its price up. The depth of the pool determines how much you can trade without moving the price much.

Example

In practiceA pool holds ETH and USDC; when you swap USDC in, you draw ETH out and the ETH price ticks up slightly.

What makes a pool safe to trade in?

Deep real reserves, locked or burned LP, and no hidden sell taxes. Headline liquidity can lie — check what you can actually sell into.

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