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Liquidity

Understanding how liquidity works in AceSteps song token pools.

Initial Liquidity​

When trading is enabled:

Initial Pool State:
├── ETH: 0
└── Tokens: 20,000

This is single-sided liquidity - the pool starts with tokens only.

Price Discovery​

The first buyer determines the initial price:

First Buy: 0.1 ETH for tokens
Pool State After:
├── ETH: 0.1
└── Tokens: ~18,000 (depends on curve)

Liquidity Growth​

Two sources add ETH to pools:

1. Trading Activity​

Each buy adds ETH to the pool:

Buy: ETH → Pool → Tokens out
Sell: Tokens → Pool → ETH out

2. Revenue Distribution​

Ad revenue adds ETH without removing tokens:

poolManager.donate(poolKey, ethAmount, 0, "");

Platform LP Position​

The platform holds the initial LP position:

  • Earns 1% swap fees
  • Position grows with trading volume
  • Cannot withdraw underlying tokens

Slippage​

For low-liquidity pools:

  • Large trades may have high slippage
  • Use slippage protection
  • Consider trade size vs pool depth