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  1. Home
  2. /Glossary
  3. /Impermanent Loss
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defi

Impermanent Loss

The difference between holding tokens in a liquidity pool versus just holding them in your wallet.

Definition

The difference between holding tokens in a liquidity pool versus just holding them in your wallet. When prices move significantly, LPs can end up with less value than if they'd done nothing. It's called 'impermanent' because it reverses if prices return to the original ratio.

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Learn More About Impermanent Loss

GuideDEX Guide: Decentralized ExchangesGuideYield Farming GuideBlogWhat Is Impermanent Loss in DeFi? (Explained Without the Math Headache)

Related Terms

Liquidity Pool

A pool of tokens locked in a smart contract that enables decentralized trading.

AMM (Automated Market Maker)

A type of decentralized exchange that uses math formulas instead of order books to price trades.

Yield Farming

Strategically moving capital between DeFi protocols to maximize returns.

1inch

A DEX aggregator that splits trades across multiple decentralized exchanges to find the best overall price.

Aave

One of the biggest lending and borrowing protocols in DeFi.

Across Protocol

A cross-chain bridge that uses an optimistic verification system and a network of relayers to move tokens between chains quickly.

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