A liquidity pool is the foundation of most meme-coin trading. Liquidity providers deposit two assets (for example a meme coin and USDC) in equal value; traders then swap between them using an automated pricing function. The depth of the pool determines how large a trade can be before the price moves significantly. Thin pools are easy to manipulate and prone to slippage; deeper pools are closer to the behavior of traditional order-book markets.
Glossary
Liquidity pool
A smart-contract-held reserve of two tokens that traders swap against on a decentralized exchange.