What is a liquidity pool?
You have often tried to understand what a liquidity pool is. You have also tried to find out from many cryptocurrency experts what a liquidity pool is. But you may not understand what they are talking about. Today I will explain to you with a simple example what a liquidity pool is.
Take a half-full vessel of water and put a small ball in it. For example, consider this ball to be a red ball and its name is BNB BINANCE SMART CHAIN COIN. And with this coin, you want to buy the blue ball which is an Elongate Coin.
The size of both the balls is the same. We put the red ball BNB water in the liquidity pool and ELONGATE means by the blue ball.
Both balls were small and did not cause much disturbance in the liquidity pool.
Now we repeat this process again and try to buy more blue balls IE Elongate to see what happens. We put the big tennis ball BNB instead of the small red ball. Now when we put the big tennis ball, there was some better movement in our jar, the liquidity pool, and the water meter on it. The water level had risen there, which meant that the price of blue balls, IE elongate, had gone up in the market.
Let’s do one last experiment. Now we try to put the basketball in the jar to buy blue balls IE Elongate Coin which means 100000 BNB.
But, hey, what’s going on? Why can’t it go inside?
Because our jar means that the liquidity pool is small.
This shows us a very beautiful thing about cryptocurrency and that is that if a person tries to buy all the coins at once on the strength of his money, he will not be able to buy all the coins because the Liquidity pool facility is available. Our coins are safe in this pool.
In this way, even if a single person wants to buy a coin with a lot of his capital, he cannot buy one, and he cannot cut the value of the coin in this way.
Also, in the service of you people, let’s say that when someone buys more coins, it means that he wants me to buy the most coins and surpass the rest of the people who have less money. Or if I drop the market price of Elongate for blue balls, he can’t do that because if he tries to buy a blue ball of 100000 BNB such as, he will get the coin at a much more expensive price and Because he will not be able to buy them.
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