Why is a pool out of sync?#
A liquidity pool experiencing price divergence is considered out of sync.
Price divergence is when a pool's current price is out of range from other pools for the same token.
For example, consider a stablecoin/WCTN pool:
- The pool's current price is
1 stablecoin = 0.00022 WCTN. - The current price in other pools is
1 stablecoin = 0.00027 WCTN.
Because the first pool's price differs from the others, that pool is out of sync.
Swapping in or adding liquidity to an out-of-sync pool creates an arbitrage opportunity. Arbitrage is a strategy that exploits price differences for the same token across markets or pools, letting traders profit from temporary inefficiencies.
These opportunities are constantly searched for on-chain by arbitrage bots, which:
- Detect price divergence between pools.
- Buy the token from another pool at the better price.
- Sell the token into the out-of-sync pool.
- Profit from the price difference.
Because of this, swapping in or adding liquidity to an out-of-sync pool can result in a loss for the provider. Check that a pool's price matches the wider market before interacting with it.