New fix for curse of impermanent loss proposed on Avalanche
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....
Related News
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....
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....
There ain't no such thing as a free lunch, however. Bancor is updating its protocol once more to defeat the insidious issue of impermanent loss, which it earlier called “DeFi’s dirty little secret.”Impermanent loss, also called divergence loss, affects exchanges based on automated market makers like Bancor or Uniswap. It happens when the prices of two assets in a liquidity pool diverge significantly, with one side going strongly up or down in value.The effect translates to a loss of value compared to a benchmark “buy and hold” portfolio. Liquidity providers (LP) may take out less money....
Bancor’s approach to dealing withimpermanent loss on decentralized exchanges might have significant implications for idle altcoin capital. Bancor has released a status report for its v2.1 decentralized exchange upgrade covering the performance of its decentralized exchange over the last three months.According to the document, the total liquidity increased by almost 100% resulting in the platform earning about $1.12 million in cumulative swap fees.Bancor’s report noted that the fee earnings were more than five times the cost required for impermanent loss compensation for liquidity....
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....