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How Do ‘Fee Earnings’ from the Pool Help Offset Impermanent Loss for the LP?

Accumulated trading fees act as a yield that can potentially exceed and thus compensate for the unrealized loss.
Greeks.Live06.11.25

How Do ‘Fee Earnings’ from the Pool Help Offset Impermanent Loss for the LP?

Liquidity providers earn a portion of the trading fees generated by every transaction that occurs within the pool. Over time, these accumulated fee earnings can serve as a form of compensation.

If the total fees earned by the LP exceed the magnitude of the impermanent loss, the LP's position remains profitable compared to simply holding the assets. This fee-based yield is the primary incentive for providing liquidity.

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