@maretus

Impermanent loss is such a misleading term. People hear “loss” and think it means they lost something. I will try to explain it in stoners terms: Impermanent loss is just the difference between the profit you would have made if you had held 1 asset instead of the 2 required for a liquidity pool. (Single sided LP not included) Example: Let’s say you provide liquidity for Bracky by depositing 20M Bracky and 1 ETH. As the price of Bracky increases, it takes less Bracky to make 1 ETH. Impermanent loss is the difference in profit you would have received if you had converted that 1 ETH from the original LP into Bracky. Because you didn’t, you “missed out on the profit you would have received from only holding Bracky.” That’s all impermanent loss is. Another way to think about it is that impermanent loss is just the profit you missed by selling a token early. If you sell Bracky at 25M MC and it goes to 50M MC, you have impermanent loss because you could have sold for 2x as much. As you can see, it’s not a loss. It’s just a difference in profit. (None of this factors in concentrated LPs which are an entirely different beast that I will tackle in another post.)

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