How Do Single-Sided Staking and Concentrated Liquidity Pools Attempt to Mitigate Impermanent Loss? ⎊ Path

How Do Single-Sided Staking and Concentrated Liquidity Pools Attempt to Mitigate Impermanent Loss?

Single-sided staking eliminates IL by only requiring one asset, though it often involves complex derivatives or insurance mechanisms to manage risk. Concentrated liquidity pools mitigate IL by restricting the price range in which the capital is active.

By only providing liquidity within a small range, the capital is more efficiently used, but the LP faces 100% IL if the price moves outside the range, as their position converts entirely to the less valuable asset.

What Are the Differences between Single-Sided and Dual-Sided Liquidity Provisioning in AMMs?

How Do Rebalancing Strategies for Concentrated Liquidity Positions, Such as Active Management, Impact Realized Gains or Losses?

How Do Concentrated Liquidity Positions Alter the Risk Profile of Impermanent Loss?

What Is the Main Benefit of Capital Efficiency Achieved by Concentrated Liquidity?

How Does Regulatory Oversight Restrict the Use of Portfolio Margining in Some Jurisdictions?

How Does a Concentrated Liquidity Pool Modify the Constant Product Formula’s Impact?

What Is the Trade-off between Capital Efficiency and Impermanent Loss Risk in Concentrated Liquidity?

How Does the Concept of ‘In-the-Money’ Options Relate to the Active Range of a Concentrated Liquidity Position?

Glossar

Concentrated Liquidity Pools

Allocation ⎊ Concentrated Liquidity Pools represent a capital deployment strategy within automated market makers, shifting from uniform distribution to customized ranges, thereby enhancing capital efficiency.

Concentrated Liquidity

Allocation ⎊ Concentrated Liquidity represents a strategic deployment of capital within automated market makers, notably on decentralized exchanges, shifting from a uniform distribution to a targeted provision around specific price ranges.