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So we all know what happens when there is no liquidity at all; it's impossible to buy or sell a token with no liquidity. But what would happen in the reverse scenario; if 100% of a token's supply was provided to the liquidity pool?

I imagine necessarily this would mean that the price is capped at whatever funds you are able to provide, but what if you believe there would be a higher market cap for your token?

Question 2: To avoid this problem, you might put only put a small percentage of the total supply into the liquidity pool set at a particular ratio. But then how would you avoid the problem where a large percentage of the total supply is not within the pool and cannot be added unless more funds are attained?

Scaling auto-liquidity solves this partially, however you run into the same problem, as to my understanding you must add the pair at equal rates to the ratio of the initial pool provided or you will tank the price of the token, as auto-liquidity would only compounds upon the initial pool.

Solutions appreciated

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    You cannot allocate 100% of token supply to a pool, because as soon as there is a single buy, then the 100% of the supply is no longer in the pool. Commented Mar 14 at 9:00
  • Please, one question per post!
    – kfx
    Commented Mar 14 at 10:41

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The is no problem with this approach. You can add the initial liquidity at whatever initial price you want. If people believe that the token should be worth more that it's initial price, they will buy the token from the pool (and it's price will increase automatically, potentially to the infinity). If not, no-one will trade in the pool.

In Uniswap v3 and other concentrated liquidity DEX you can even do more, not just set the initial price, but add tokens in a specific price range. For example you can set the initial price to 1.0 and add in the price range from 1.0 to 10.0. Then you won't even need any tokens to pair your token with, it will be single-sided liquidity pool, up to the moment people start trading.

Usually this does not happen because some of the token supply is reserved for other purposes - for rewarding the creators themselves and for other purposes, like community incentives.

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