Impermanent Loss
Strict Definition
"A temporary loss of funds experienced by liquidity providers due to volatility in a trading pair. It is the price difference between holding tokens in a wallet vs. providing them to a pool."
Liability Check // Risk Analysis
The 'Yield Trap' risk. You may earn 20% in fees, but if the tokens move 50% in price, you could still end up with less total value than if you had done nothing. The loss only becomes 'permanent' when you withdraw.
Knowledge Context // Related Terms
Auditor NotesVS-AN-2026
"Only provide liquidity for assets that are highly correlated (e.g., two different pegged stablecoins) to virtually eliminate Impermanent Loss."
"Use 'Impermanent Loss Calculators' before entering a pool to understand the 'breakeven' price movements."
"Differentiate between 'Transaction Fee Income' and 'Principal Loss' (IL) for corporate financial audits."
SCHEMA_VER: AEO_3.2
LAST_AUDIT: 1/8/2026
HASH: S8LQ6