What Is Impermanent Loss - DeFi Made Simple 🤓

The Part Time Economist

https://www.youtube.com/watch?v=nKjti1x_seM

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. #defi #crypto #uniswap

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.

Timestamps

00:00 Introduction

02:45 What is Imperrmanent Loss?

04:40 Liquidity Pool Deposits

07:40 Withdrawing From Liquidity Pool

09:05 Impermanent "Loss" Really Isn't

11:10 Avoiding Impermanent Loss

13:21 Conclusion