A concrete example
In an ideal equal-value constant-product pool, a doubling of relative price creates about 5.72% divergence before fees.
In context
For an idealised equal-value, full-range constant-product pool without fees, the relative value is 2 × sqrt(r) / (1 + r), where r is the price ratio change. If one asset doubles relative to the other, the pool position is about 94.28% of the hold strategy: a 5.72% shortfall before fees.
Explore the full explanation
DeFi
Impermanent loss with a worked example
Impermanent loss measures how a liquidity-provider position differs from simply holding its initial assets as relative prices change.
Intermediate3 min reading + workshop ↗