Pencil DAO

Impermanent Loss

Impermanent loss (IL) is a loss that funds are exposed to when they are in a liquidity pool. This loss typically occurs when the ratio of the tokens in the liquidity pool becomes uneven. Although, impermanent loss isn’t realized until the tokens are withdrawn from the liquidity pool. This loss is typically calculated by comparing the value of your tokens in the liquidity pool versus the value of simply holding them. Since stable coins have price stability, liquidity pools that utilize stable coins can be less exposed to impermanent loss.
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