Editing Liquidity pool

**Liquidity pool** is a smart contract holding reserves of two tokens that traders swap against, with prices set by a formula rather than an order book; on [[Solana]], memecoins trade mainly in pools on [[Raydium]], [[Meteora]] and PumpSwap.[^1][^4] Depositors receive LP tokens representing their share of the pool.[^1]

## How it works
### Constant product
Raydium's AMM v4 and CPMM pools use the constant-product rule x · y = k: a trade must leave the product of the two reserves at least as large as before. The liquidity providers' share of fees stays in the reserves, so k grows over time.[^1] The first deposit mints LP tokens equal to the square root of the two amounts, and a small amount is burned to prevent a first-depositor attack; later deposits mint LP tokens pro rata.[^1] A sale large relative to the pool moves the price sharply and suffers heavy slippage, so a paper gain in a thin memecoin pool may not be realisable.[^2]
### Concentrated and one-sided liquidity
Meteora's DLMM pools place liquidity in discrete price bins, each a single price; swaps within the active bin trade at a fixed price and move to the next bin once it is used up. DLMM accepts single-sided deposits of only one token, offers fees that rise with volatility, and is pitched for launch markets.[^5]

## Launchpads
On [[pump.fun]], a token's liquidity moves from its [[Bonding curve]] into a PumpSwap pool when the curve completes, and the LP tokens received are burned.[^3] PumpSwap, launched on 20 March 2025, is a constant-product AMM charging 0.25% per trade, of which 0.2% goes to liquidity providers; graduates previously migrated to Raydium on reaching a $69,000 market cap, for a 6 SOL fee.[^4]

## LP burns and locks
Whoever holds a pool's LP tokens can withdraw its reserves, so creators who seeded a pool can remove it in a [[Rug pull]]. Burning the LP tokens makes the liquidity permanent, as pump.fun does on migration.[^3] In March 2024 the developer of [[Slerf]] said he had accidentally burned both the LP tokens and the tokens set aside for the [[Memecoin presale|presale]] airdrop, after raising about $10 million in presale funds.[^6]

## One-sided pools
- [[Libra]]: a class action filed on 17 March 2025 alleges that [[Kelsier Ventures]], [[KIP Protocol]] and Meteora used a "predatory" one-sided liquidity pool to inflate LIBRA's price, and that insiders drained about $107 million from its pools; Argentine President Javier Milei is mentioned but not a defendant.[^7]
- [[Melania Meme]]: [[Bubblemaps]] said in April 2025 that [[Hayden Davis]] had covertly sold MELANIA through single-sided liquidity, the tactic it said he used with LIBRA, and that about $30 million of tokens were moved out of community funds; neither Davis nor the team explained the transfers.[^8]

## Timeline
- 2024-03: Slerf developer says he burned the LP tokens by mistake[^6]
- 2025-03-17: LIBRA class action filed in New York[^7]
- 2025-03-20: PumpSwap launches[^4]
- 2025-04-07: Bubblemaps reports $30 million MELANIA transfers[^8]

## See also
- [[Glossary of trenching terms]]
- [[List of memecoin traders]]
- [[Trenches]]
- [[Mint authority]]
- [[Sniping]]
- [[Bundling]]
- [[Copy trading]]
- [[KOL]]

## References
1. [Constant product](https://docs.raydium.io/algorithms/constant-product.md), Raydium documentation, n.d.
2. [PEPE Holder Turns $250 into $1M in Four Days. But Can They Sell It?](https://decrypt.co/137203/pepe-holder-turns-250-into-1m-in-four-days-but-can-they-sell-it), Decrypt, 2023-04-19
3. [Pump program README](https://github.com/pump-fun/pump-public-docs/blob/main/docs/PUMP_PROGRAM_README.md), pump.fun (GitHub), n.d.
4. [Pump.fun launches DEX called PumpSwap to instantly migrate graduated tokens](https://www.theblock.co/post/347360/pump-fun-launches-dex-called-pumpswap-to-instantly-migrate-graduated-tokens), The Block, 2025-03-20
5. [What is DLMM?](https://docs.meteora.ag/core-products/dlmm/what-is-dlmm), Meteora documentation, n.d.
6. [Solana Meme Coin Slerf Racks Up $2 Billion in Volume Despite Dev Burning Presale Funds](https://decrypt.co/222207/solana-meme-coin-slerf-racks-up-2-billion-in-volume-despite-dev-burning-presale-funds), Decrypt, 2024-03-18
7. [LIBRA memecoin orchestrators named as defendants in US class-action suit](https://cointelegraph.com/news/burwick-law-file-class-action-libra-memecoin-scandal), Cointelegraph, 2025-03-18
8. [Melania Trump memecoin team sold $30 million: Bubblemaps](https://cointelegraph.com/news/melania-trump-memecoin-team-sold-30-million-bubblemaps), Cointelegraph, 2025-04-09