Liquidity pool

A liquidity pool is a smart contract holding reserves of tokens that traders swap against, providing the liquidity for a decentralized exchange.

Instead of matching buyers and sellers, a pool holds token reserves that anyone can trade against, with the price determined by the ratio of those reserves through an AMM formula. Liquidity providers deposit paired tokens and earn a share of trading fees while bearing impermanent loss. Pool reserves are the on-chain source of a DEX price and its depth. Our decoded transaction and on-chain data let a caller read pool reserves and swap events directly to derive prices and slippage.