What Is the 'Liquidity Pool' and How Does Its Depth Affect De-Pegging? ▴ Learn

What Is the ‘Liquidity Pool’ and How Does Its Depth Affect De-Pegging?

A liquidity pool is a pool of tokens locked in a smart contract that facilitates trading on a Decentralized Exchange (DEX). The pool's "depth" is the total value of assets within it.

A shallow pool cannot handle large trades without significant slippage, making it easier for a large sale to push the stablecoin price far from its peg. Deep pools resist de-pegging better.

What Is “De-Pegging” in the Context of Stablecoins and How Does It Affect LPs?

How Does ‘Slippage’ Affect Large Trades in a Liquidity Pool?

How Does a Cryptocurrency Exchange’s Order Book Depth Directly Influence Potential Slippage?

How Does the ‘Spread’ on the Order Book Relate to Market Depth and Liquidity?