A concrete example
A lending reserve and an exchange pool can both hold tokens but use different rules.
In context
Trades change reserve ratios and therefore the marginal price. A large trade relative to the pool moves that price substantially. Slippage tolerance limits the execution deterioration a user accepts; it does not promise that the displayed quote will be achieved. Arbitrage links pool prices to external markets through trading incentives.
Explore the full explanation
DeFi
Liquidity pools and automated market makers
A liquidity pool holds assets under contract rules so users can exchange or borrow them.
Intermediate3 min reading + workshop ↗