> For the complete documentation index, see [llms.txt](https://teneofinance.gitbook.io/teneo-finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://teneofinance.gitbook.io/teneo-finance/tenxxx-token-ecosystem/liquidity-pools-on-dex.md).

# ⚖️ Liquidity Pools on DEX ⚖️

Explains how liquidity pools on decentral exchanges like pancake swap behave in the Teneo ecosystem

Besides the [AMM ](/teneo-finance/tenxxx-token-ecosystem/automated-market-maker.md)another important part of the ecosystem is the existence of liquidity pools. With them Teneo creates trading pressure on the open market for [arbitrage](/teneo-finance/introduction/untitled.md).\
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As soon as the price of an [underlying token](/teneo-finance/tenxxx-token-ecosystem/underlying-token.md) or a [tenXXX ](/teneo-finance/tenxxx-token-ecosystem/tenxxx-token.md)token changes in one pool, every other pool will follow because there are profit opportunities for [arbitrage traders](/teneo-finance/introduction/untitled.md).\
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The liquidity pool also gains reflows like the pools of AMPL getting rebases. \
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As an example: \
LP tenETH/BUSD -> x \* y = k -> 100*\** 100 = k -> [reflow ](/teneo-finance/tenxxx-token-ecosystem/tenxxx-token.md#reflows)-> 101 \* 100 = k -> the price goes down for [tenETH](/teneo-finance/tenxxx-token-ecosystem/tenxxx-token.md). \
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BUT: **The** [**AMM** ](/teneo-finance/tenxxx-token-ecosystem/automated-market-maker.md)**ratio does not change.**\
So more [arbitrage ](/teneo-finance/introduction/untitled.md)opportunities are generated by price differences and with this creating more [arbitrage ](/teneo-finance/introduction/untitled.md)trading pressure.

{% hint style="info" %}
How liquidity pools work: [Uniswap](https://docs.uniswap.org/protocol/V2/introduction)
{% endhint %}