Impermanent loss
ILdivergence loss
The opportunity cost an LP incurs when pool composition rebalances toward the underperforming asset.
Material for volatile-asset pools; small for like-kind stablecoin pools (where prices stay within a tight band) but non-zero during depeg events. The "impermanent" framing assumes prices revert — if they don't, IL becomes realised loss.
Related terms
- Liquidity poolA pool of token reserves that a smart contract uses to facilitate swaps, lending, or other on-chain activity.
- AMM (automated market maker)A smart contract that prices assets via a pricing curve over a pool of reserves rather than an order book.
- LP tokenA receipt token representing a share of an AMM liquidity pool — claims a pro-rata fraction of pool reserves.