What Is Impermanent Loss and How Can Derivatives Mitigate It? ▴ Learn

What Is Impermanent Loss and How Can Derivatives Mitigate It?

Impermanent loss (IL) is the temporary loss of funds a liquidity provider experiences when the price of their deposited assets changes compared to simply holding them. Derivatives, specifically options, can mitigate IL by allowing the DAO to buy a put option on the volatile asset in the pool, insuring against a sharp price drop that causes IL.

What Is the Risk of ‘Impermanent Loss’ in DeFi?

How Does ‘Impermanent Loss’ Relate to Providing Liquidity on an AMM?

How Does a Sudden Drop in Implied Volatility Affect an Option’s Price?

What Is “Impermanent Loss” in the Context of DeFi Smart Contracts, and How Do L2s Indirectly Mitigate It?