Course Content
Impermanent Loss Explained
If you’ve been involved with DeFi at all, you almost certainly heard this term thrown around. Impermanent loss happens when the price of your tokens changes compared to when you deposited them in the pool. The larger the change is, the bigger the loss. Wait, so I can lose money by providing liquidity? And why is the loss impermanent? Well, it comes from an inherent design characteristic of a special kind of market called an automated market maker. Providing liquidity to a liquidity pool can be a profitable venture, but you’ll need to keep the concept of impermanent loss in mind.
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Impermanent Loss Explained
About Lesson

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.

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