What Actually Happens Inside a Liquidity Pool When Someone Buys?
Follow a swap through an AMM pool and see why every trade changes the next quote.
Concept explainer · about a 2-minute readStart with two reserves
A simple pool might contain TOKEN on one side and SOL on the other. The automated market maker uses a formula to quote exchanges between them.
A buyer changes both sides
If somebody buys TOKEN using SOL, SOL is added to the pool and TOKEN is removed. The balance between the reserves changes.
The next token costs more
Because the ratio has moved, the AMM quotes a higher amount of SOL for the next units of TOKEN. This is the mechanical reason a buy can push an AMM price upward.
Selling reverses the direction
A seller adds TOKEN back to the pool and removes SOL. The reserve ratio moves the other way and the quoted token price falls. Fees and the exact AMM design affect the numbers, but the reserve movement is the core idea.
Follow the assets, not the button
When someone presses Swap, the pool is doing something very physical in accounting terms. If the pair is GRIFF/SOL and the trader buys GRIFF with SOL, SOL is added to the pool and GRIFF is removed. The AMM calculates how much GRIFF can leave while respecting its pricing formula and fees. Once the transaction settles, the pool now contains a different quantity of each asset. That new state is what the next trader meets.
Why the next buyer gets a different quote
A purchase has already pushed the reserves away from their previous balance. Buying another equal-sized amount therefore usually costs more than the first purchase. This is the curve in action, not a person deciding to raise the price. Selling reverses the direction. Thinking in terms of changing reserves helped me understand why a pool can quote a price instantly even though there is no traditional seller waiting on the other side of every trade.
This is why adding liquidity to GRIFF changed how violently test trades moved the quoted price. More reserves meant the same trade represented a smaller change to the pool.