Impermanent loss challenges the claim that DeFi is the ‘future of France’
Investors are often lured to DeFi by the four-digit APYs on offer, but in many instances, impermanent loss actually siphons away any potential profits investors might have accrued. Impermanent loss is one of the most recognized risks that investors have to contend with when providing liquidity to an automated market maker (AMM) in the decentralized finance (DeFi) sector. Although it is not an actual loss incurred from the liquidity provider’s (LP) position — rather an opportunity cost that occurs when compared with simply buying and holding the same assets — the possibility of getting less....
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Read this guide to understand the risk, known as impermanent loss (IL), that liquidity providers take in exchange for fees earned in liquidity pools. How to avoid impermanent loss?Liquidity providers cannot avoid impermanent loss completely. However, they can use some measures to mitigate this risk such as using stablecoin pairs and avoiding volatile pairs.One strategy to avoid temporary loss is to choose stablecoin pairs that offer the best bet against IL since their value does not move much; they also have fewer arbitrage opportunities, lowering the risks. Liquidity providers using....
Trader Joe says its Liquidity Book will mitigate the impermanent loss “suffered by so many liquidity providers on other DEXs” during times of market turbulence. Avalanche-based decentralized finance (DeFi) protocol Trader Joe claims it may have found a way to mitigate one of DeFi’s biggest weaknesses — impermanent loss. In a newly released white paper on Tuesday called the JOE v2 Liquidity Book, authored by Quant developers and researchers Adam Sturges, TraderWaWa, Hanzo and software engineer Louis MeMyself, the developers outlined the use of Liquidity Book (LB) with an additional variable....
Impermanent loss relates to a condition wherein investors end up losing assets they had previously dedicated to providing liquidity to a liquidity pool. Zircon Finance, an automated market maker (AMM) and a decentralized exchange on Moonbeam, announced the launch of a mainnet network to address investors’ challenges related to impermanent loss in decentralized finance (DeFi).Impermanent loss relates to a condition wherein investors lose assets they had previously dedicated to providing liquidity to a liquidity pool for earning profits via yields. The mainnet network, dubbed Zircon Gamma,....
Bancor’s new liquidity mining strategy promises to bring organic on-chain liquidity and make DeFi staking easier for DAOs. Bancor, the first decentralized finance protocol to introduce liquidity pools, has come out with a new liquidity solution with the launch of its v3, called Bancor 3.Bancor 3 went live with a promise to offer protection against impermanent loss to liquidity providers. The new architectural changes promise to bring sustainable on-chain liquidity and make decentralized finance (DeFi) staking simpler for decentralized autonomous organizations (DAOs).The v3 project has....
Bancor 3 will feature instant impermanent loss (IL) protection, an unlimited deposit staking pool, and an Omnipool offering a share of fees generated from the entire platform. Decentralized automated market maker (AMM) Bancor is set to launch new staking pools and an upgrade to its impermanent loss protection mechanism as part of its long-awaited Bancor 3 update.Bancor was founded in 2017 and was the first DeFi protocol to introduce AMMs to the blockchain. The Ethereum-based exchange and lending platform also allows users to earn staking rewards via various liquidity pools. In a Nov. 30....