Protocol Depth

Definition ∞ Protocol depth, in the context of decentralized exchanges and liquidity pools, refers to the total amount of assets available for trading at various price levels. A protocol with greater depth can accommodate larger trades with less price impact, indicating higher liquidity and market efficiency. It signifies the robustness of the trading environment and its capacity to absorb significant buy or sell orders. High depth reduces slippage for users.
Context ∞ Market analysts frequently assess protocol depth as a key metric for evaluating the health and usability of decentralized trading platforms. News reports often highlight efforts by protocols to increase their depth through incentive programs or integrations with other liquidity sources.