Learn / Intermediate
Decentralized exchanges and liquidity pools
Learn swaps, price impact and the trade-offs faced by liquidity providers.
The Token Press education desk · Reviewed 2026-09-08
Trading against a pool
Some decentralized exchanges use automated market makers rather than a conventional order book. Traders interact with pools whose pricing rules respond to their balances. Liquidity providers supply assets and may receive fees.
Different designs use different formulas and liquidity ranges. A familiar swap interface can conceal meaningful differences in how prices are calculated and how liquidity is allocated.
Price impact and slippage
Price impact is the movement caused by the trade itself relative to available liquidity. Slippage also describes a difference between the expected and executed outcome as conditions change. A tolerance setting limits an accepted outcome; it does not manufacture liquidity.
For example, swapping a large amount into a shallow pool can be costly even if the displayed trading fee is low. Check the expected amount received and route rather than comparing fees alone.
Providing liquidity is a separate activity
A provider’s asset mix can change as others trade. Its value can differ from simply holding the starting assets, a phenomenon commonly called impermanent loss. Concentrated liquidity adds decisions about price ranges and periods outside those ranges.
Fees do not guarantee that a position will outperform holding. Contract vulnerabilities, token behavior and transaction-ordering effects also matter. To learn, compare hypothetical pool outcomes under unchanged, rising and falling relative prices before using a live position.
Sources & further reading
Educational content. Examples are illustrative. Consult the linked documentation for current details.