What Role Do Vesting Periods Play in Reducing the Impact of LPs Exiting Due to Impermanent Loss?

Vesting periods require LPs to lock their earned tokens or rewards for a set amount of time before they can be fully withdrawn or sold. While vesting doesn't directly reduce the mathematical impermanent loss, it can discourage panic selling or rapid withdrawal of liquidity when a loss is incurred.

By forcing a longer-term commitment, it promotes pool stability and gives the price ratio more time to potentially revert to the original deposit ratio, thus reducing the realized loss.