All terms
The gap between providing liquidity and simply holding the two assets.
When the price ratio of the two pooled assets changes, the pool automatically rebalances toward the one that fell. You end up with more of the loser and less of the winner than if you had just held.
It is called impermanent because it reverses if prices return to where they started. If they do not, the loss becomes very permanent when you withdraw.
A 4x price divergence between the two assets produces roughly a 20 percent shortfall against just holding, before fees are counted.
That the loss is temporary. It only reverses if the price ratio returns to where you deposited, which usually does not happen. The moment you withdraw it stops being impermanent and becomes the result.
Common questions
Why is it called impermanent?
How do I avoid impermanent loss?
Where this comes up on the site
The guides that actually use this word, rather than a list of everything we have written.
Where to go next
More defi terms
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