Question

What is an impermanent loss?

Answer 1

Impermanent loss is a temporary loss of funds that liquidity providers may experience when providing liquidity to a decentralized exchange (DEX) or automated market maker (AMM) platform. It occurs when the value of one of the assets in a liquidity pool fluctuates significantly compared to when the liquidity was first provided. This results in the liquidity provider having less value in their pool than if they had simply held the assets outside of the pool.

Answer 2

Impermanent loss refers to the temporary loss of funds that liquidity providers may experience when providing liquidity to a decentralized exchange (DEX) or automated market maker (AMM) platform. This loss occurs when the price of the traded assets changes significantly, causing the value of the assets held by the liquidity provider to be less than if they had simply held those assets in their wallet instead of providing liquidity.