How Do Trading Fees Earned by the LP Offset the Effects of Impermanent Loss?
Liquidity providers earn a small fee on every trade that occurs within their pool. These accumulated trading fees are added to the pool's reserves, increasing the value of the LP's share over time.
If the accumulated fees are greater than the unrealized impermanent loss, the LP can still realize a net profit upon withdrawal. The fee income acts as a buffer or compensation against the divergence loss, often making it profitable to provide liquidity despite the risk of IL.
