The arithmetic behind the DeFi liquidity-provider risk, reproduced across four sources and three different dollar scales, and what the formula leaves out. The post What impermanent loss is, and how to calculate it appeared first on TheCoinrise.com.
What impermanent loss is, and how to calculate it
其他语言标题
- EnglishImpermanent loss refers to the temporary loss of asset value caused by price fluctuations when providing liquidity in an automated market maker (AMM). It occurs when the price of the tokens in a liquidity pool changes relative to the price at the time of deposit, leading to a lower value of the deposited assets compared to simply holding them. The calculation method is as follows: Assuming you deposit equal values of two tokens, Token A and Token B, with initial prices P0 and Q0, and the price of Token A changes to P1 while Token B remains unchanged, the impermanent loss formula is: IL = 2 * sqrt(P1/P0) / (1 + P1/P0) - 1. This formula yields a negative value, indicating the percentage loss relative to holding the tokens. The greater the price divergence, the larger the impermanent loss.
- 한국어비영구적 손실(Impermanent Loss)이 무엇인지, 그리고 이를 계산하는 방법