What Is A Liquidity Pool?

A pool, or liquidity pool, is a smart contract that allows you to instantly swap between two assets. On snippool, the most common type of pools are NFT<>SMR pools, which means that anyone holding NFTs from that collection can instantly swap them for SMR (or another available ERC20 token), or vice versa.

Pools use a bonding curve to determine the relative price at which one asset is traded for another. The more an asset is bought from a pool, the more expensive it becomes. Conversely, the more an asset is sold to a pool, the cheaper it becomes.

Ideally, a pool contains some amount of both assets, enabling users to swap back and forth between them. However, it's also possible to create a pool with just one asset, meaning that users will only be able to buy that asset from the pool.

A bonding curve is a mathematical formula which defines the relationship between an asset's price and its supply. Bonding curves are a key feature of automated market makers since they are used to algorithmically adjust asset prices.

snippool supports three types of bonding curve: linear, exponential, XYK (constant product).