When you swap ETH for USDT on a decentralized exchange, you’re not trading with another person—you’re trading with a liquidity pool, a smart contract that holds paired crypto assets to enable instant trades without order books. Also known as an automated market maker, it’s what makes DeFi trading possible without middlemen. Unlike traditional exchanges that match buyers and sellers, liquidity pools use math to set prices based on how much of each token is inside.
These pools need people to deposit tokens—called liquidity providers—to keep trades smooth. In return, they earn a share of trading fees. But it’s not free money. If the price of one token in the pair swings wildly, you could lose value compared to just holding it—that’s called impermanent loss. And not all pools are safe. Some are run by unknown teams, have weak audits, or get drained by hackers. You’ll see this in posts about fake airdrops like LNR Lunar Crystal or CHY tokens, where liquidity was pulled the moment users started investing.
Liquidity pools also connect to bigger trends. Projects like Jupiter on Solana or OraiDEX on Oraichain rely on them to offer fast, low-cost swaps. But if a pool has low volume—like renZEC, which barely gets used—it’s risky to add your funds. You might earn fees, but you’ll also be stuck with tokens no one wants to buy. Meanwhile, exchanges like MEXC and Bybit use similar logic in their P2P systems, where users act as liquidity providers for local currencies like rubles or Iranian rials. Even in places with bans, liquidity isn’t just technical—it’s survival.
What you’ll find here aren’t theory lectures. These are real cases: how a liquidity pool vanished after an airdrop, why some DeFi projects inflate their TVL to look bigger, and how you can spot a pool that’s about to collapse. No jargon. No fluff. Just what actually happens when money moves in crypto—and how to protect yourself.
Impermanent loss becomes permanent the moment you withdraw from a DeFi liquidity pool. Learn how price changes trigger real losses, which pools are riskiest, and how to avoid locking in losses.
