Plain English
Impermanent loss (IL) is the opportunity cost a liquidity provider faces when the two assets in their pool diverge in price. It is called “impermanent” because it disappears if prices return to the original ratio — but becomes permanent when you withdraw.
How it actually works
The AMM rebalances your position as prices move: when one asset rises relative to the other, the pool sells some of the rising asset and buys more of the falling one. Result: you end up with less of the winner than if you had just held. The fees you earn from trading partially or fully offset IL — whether they cover it depends on pool fees, trading volume, and the magnitude of the price divergence.
What it means for you
For LPs, IL is the most-misunderstood cost in DeFi. Stable-to-stable pools have minimal IL. Volatile pairs can lose meaningfully to IL even when paying high fees. The break-even math is rarely shown in the protocol dashboard.
We teach IL math: how to model it before entering an LP position, the pools where fees actually compensate for it, and the strategies (range orders, concentrated liquidity, hedged LP) that reduce it.
Educational content only. Not investment, tax, or legal advice.