What Is “Divergence Loss” and How Is It Related to Impermanent Loss?

Divergence loss is an alternative and arguably more descriptive term for impermanent loss. It explicitly refers to the loss incurred by the liquidity provider due to the price of the pooled assets diverging from the ratio at the time of deposit.

The term emphasizes that the loss is a result of the assets' prices moving away from each other. The term "impermanent" is used because the loss is only realized upon withdrawal, and it disappears if the prices return to the original ratio.