How Do Protocols That Offer Single-Sided Liquidity Provisioning Manage the Risk of Impermanent Loss for Their Users?

Protocols offering single-sided liquidity often use their native token to absorb the impermanent loss risk. When a user deposits a single asset, the protocol pairs it with its own token.

If impermanent loss occurs, the protocol's treasury is used to compensate the user, often through the issuance of more native tokens. This creates a more user-friendly experience but can lead to inflation of the native token and may not be sustainable in the long term, especially during periods of high market volatility.