@jeffbunked

Impermanent loss occurs when the value of assets in a liquidity pool changes relative to when they were initially deposited. This loss is "impermanent" because it only becomes realized when the assets are withdrawn. For example, if a liquidity provider adds equal amounts of two cryptocurrencies to a pool, and one token increases significantly in value, they may end up with a smaller portion of the more valuable token when they withdraw. This reduces the overall value of their holdings compared to just holding the tokens outside the pool. While liquidity providers earn transaction fees, impermanent loss is a key risk that needs to be managed, especially in highly volatile markets.

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