101: Core Concepts

Impermanent Loss

The risk of the diverging value of assets in a liquidity pool.

Impermanent Loss

Introduction to Impermanent Loss

101 Level Core Concepts Course

Impermanent loss refers to the potential loss that can occur when providing liquidity to a trading pair on a decentralized exchange (DEX). When a DEX is being used to trade assets, liquidity providers (LPs) play a key role in facilitating trades by providing assets to the DEX's trading pool. However, when the prices of the assets in a particular trading pair change, LPs may incur a loss as a result of providing liquidity. This loss is also called divergent loss, and it is caused by the difference in the value of the assets in the trading pair over time.

Liquidity Mining