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Liquidity Pool Burnt
Overview of Liquidity Pools
A liquidity pool is a fundamental block of decentralized finance (DeFi). Essentially, it’s a collective pool of funds that enables the trading of any token pair.
How Liquidity Pools Function
- Creation: Developers initiate a liquidity pool by creating a new token, like DogCoin, and pairing it with SOL.
- Trading: Participants can exchange DogCoin and SOL within this pool, ensuring continuous liquidity and making it easy for anyone to trade.
Risks Associated with Liquidity Pools
- Ownership and Control: Developers hold an SPL (Solana Program Library token) that signifies ownership of the pool.
- Rug Pulls: Holding LP pool tokens by the developer allows them to potentially withdraw all funds abruptly, which will make the traded tokens valueless.
General Tips
- Verification: Before investing, verify whether the liquidity pool is ‘burnt’ through platforms like BirdEye or rugcheck. A burnt status indicates that the developer cannot withdraw the funds.
- Example of Risk: A non-burnt liquidity pool on rugcheck shows that the developer has control over the LP tokens and can withdraw liquidity to the pool at any time.
Our New Pairs monitor on all our bots will show you whether the percentage of LP tokens that are burnt.