DeFi protocols like Uniswap, SushiSwap, or PancakeSwap have seen an explosion of volume and liquidity. These liquidity protocols enable essentially anyone with funds to become a market maker and earn trading fees. Democratizing market making has enabled a lot of frictionless economic activity in the crypto space.

So, what do you need to know if you want to provide liquidity for these platforms? In this article, we’ll discuss one of the most important concepts – impermanent loss.