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…Impermanent Loss (IL) A succinct definition of Impermanent Loss (IL) Impermanent Loss (IL)Level UpNEWIndividualsBusinessesDevelopersDiscoverCompanyGLOSSARYIMPERMANENT LOSS (IL)Copy linkShare on TwitterShare on FacebookShare on LinkedinImpermanent Loss (IL)Impermanent loss is one of the risks involved when engaging with yield farming in a decentralised finance (DeFi) protocol. It occurs when there is a change in the token price of the deposited assets: The larger the difference, the more risk to …
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…Since its first appearance, the term has become well-known even beyond the crypto community. DeFi stands for decentralised finance, and with this new industry also comes its own jargon. Here are five terms central to DeFi that you should know. Article Overview: What is a Dapp?What is a DEX?What are Gas and Gas Fees?What is Impermanent Loss (IL)?What is Passive Income? 1) What is a Dapp? A review of traditional apps DeFi runs on decentralised applications (dapps). Before diving deep into the me…
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…However, one of the biggest risks of the AMM model is impermanent loss. Impermanent loss is defined as the opportunity cost of contributing two crypto assets into a liquidity pool instead of holding the two crypto assets separately outside the liquidity pool. Impermanent loss occurs when the price of one token rises or falls relative to the other. The bigger the change, the larger the impermanent loss will be.What is UNI used for? UNI is the governance token for Uniswap. UNI was introduced on 16…
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…This fee compensates them for the risk of potential impermanent loss. 4. Impermanent Loss Impermanent loss occurs when the prices of tokens in a liquidity pool change compared to when they were deposited. The more significant the change, the greater the potential loss when compared to holding the tokens outside the pool. Some AMMs offer strategies to mitigate impermanent loss, such as providing insurance-like mechanisms or adjusting the fee structure. 5. Governance and Upgrades In many AMMs, gov…
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…Potential Loss In liquidity-providing strategies (e.g., Automated Market Makers), if the price of deposited assets diverges, impermanent loss can occur. For example, if a user provides $1,500 USDC and 1 ETH ($1,500) to a pool and ETH doubles in price ($3,000), rebalancing may leave the user with less total value than simply holding. Withdrawing might result in a 5% to 7% loss before accounting for trading fee rewards. 4. Liquidity Risk Some DeFi protocols or tokens might lack sufficient liquid…
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…These are usually in the form of a portion of the platform’s generated trading fees that are allocated back to the LP. As with any market, there are risks, such as impermanent loss (IL), which can occur after depositing your assets into a liquidity pool and the price of the tokens rises or decreases. For more information on IL, check out this article. For example, let’s look at VVS Finance and its VVS token, which can be used in a liquidity pool, such as the VVS-CRO liquidity pool. Below w…
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…It stands for ‘Hold on for dear life’, meaning to hold onto investments for a long period of time, through both bull and bear markets.Full definitionHODLerA ‘HODLer’ is someone who holds onto their digital assets long term, regardless of market volatility or price fluctuations.Full definitionHoneypotHoneypot scams are deceptive schemes that lure unsuspecting victims with the promise of lucrative rewards.Full definitionHooksIn the context of blockchain, ‘hooks’ typically refer to piec…
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…Market participants should research and bear in mind the potential risks about yield farming. Impermanent Loss (IL) is the unrealised loss incurred due to the changes of a token’s price, leading to tokens becoming less valuable than if they had been held without participating in a liquidity pool or yield farming. No matter the rise or drop of the price for the staking token, IL exists unless the token’s price returns to the initial state. Challenges of Using a DEX Specific Knowledge Required…
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…Market participants should research and bear in mind the potential risks about yield farming. Impermanent Loss (IL) is the unrealised loss incurred due to the changes of a token’s price, leading to tokens becoming less valuable than if they had been held without participating in a liquidity pool or yield farming. No matter the rise or drop of the price for the staking token, IL exists unless the token’s price returns to the initial state. Challenges of Using a DEX Specific Knowledge Required…
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…Pools include comparable assets to minimise impermanent loss and increase the likelihood of returns. CRV developers address a fundamental issue in the stablecoin community: a lack of specialised services. Today, there are several varieties of stablecoins in circulation. Curve specialises in stablecoins that tie to national currencies. It offers a lucrative market and structure that gears to capitalise on the unique properties of these currencies. Curve, therefore, serves as a bridge between cen…
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