What Is "Impermanent Loss" and How Does POL Mitigate Its Risk for the Protocol? ▴ Learn

What Is “Impermanent Loss” and How Does POL Mitigate Its Risk for the Protocol?

Impermanent loss (IL) is the temporary loss of funds an investor experiences when providing liquidity to an Automated Market Maker (AMM) pool compared to simply holding the assets. It occurs due to price divergence between the two assets in the pool.

For a DAO, Protocol Owned Liquidity (POL) mitigates this risk because the protocol owns the loss, but the long-term benefit of stable liquidity and fee capture often outweighs the IL, treating it as a cost of doing business.

Define ‘Divergence Loss’ as an Alternative Term for Impermanent Loss

Is It Possible for a Short-Term OTM Option to Have a Higher Absolute Theta than a Long-Term ITM Option?

Explain the Concept of “Impermanent Loss” in Decentralized Finance (DeFi) Liquidity Pools

How Does Impermanent Loss Relate to Providing Liquidity for Derivative Trading on an AMM?