Impermanent Losses

3 Jun 2022

Every crypto user one way or the other suffers impermanent losses. This has been a major concern in the crypto space, but then people most times readily agree to fall prey to Impermanent Losses. 

What could be the reason why?

What then are Impermanent Losses?

Impermanent Loss is a loss incurred by a crypto user when They provide liquidity to a certain pool and there's a price fluctuation in the pool hereby causing the value of the liquidity to drop in dollar value. 

IL (Impermanent Loss) is suffered by most crypto users but then, people never stop providing liquidity, why is that?

In as much as Liquidity providers suffer IL, crypto projects came up with a solution to ensure crypto users provide liquidity.

This was the introduction of farm pools for earning a certain token by staking Liquidity tokens over a period of time to earn particular tokens at a certain APR.

Although, liquidity pools of stable pairs don't suffer from IL, most non-stable pairs are subjected to ILs.

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