What Is Impermanent Loss - DeFi Made Simple


Impermanent loss refers to a situation in which a person can "lose" money lending cryptocurrency on DeFi protocols while simultaneously increasing the value of their holdings. In my opinion, impermanent loss is one of the most difficult crypto concepts to understand which is why I made this beginner-level video that explains what impermanent loss is, how impermanent loss works, and mitigating factors to consider when it comes to impermanent loss.

For those of you who don't have time to watch the whole video, the key points are that 1) Impermanent loss isn't always a loss per se, but rather the lost value compared to simply hodling the assets. 2) Impermanent loss is a function of the way that DeFi protocols automatically rebalance the ratio of their assets via the AMM algorithm.

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The Part Time Economist
The Part Time Economist

Hi everyone. I'm just a simple man trying to make my way in the universe. I am passionate about cryptocurrency and hope that I can make at least some small contribution towards promoting wider crypto adoption and understanding.


The Part Time Economist
The Part Time Economist

Hi everyone. This is just a place for me to post some of my thoughts and analysis. I hope that someone finds them useful.

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