Impermanent loss is a concept that only appeared after the emergence of automatic market makers. Even after the emergence of uniswap for a long time, no one mentioned it. However, as more and more people participate in market making, people find that as long as you participate in market making, you can’t buy back the coins you originally held. This part of the lost funds is the impermanent loss. So many people want to ask, is impermanent loss a real loss or a permanent loss? To answer this question, you still need to know the formula of impermanent loss:
P0 is the price tokenA/tokenB of starting liquidity farming, Pn is another price of that.
From the above calculation formula, it can be seen that only when P0=Pn, impermanence loss will be equal to zero. However, the above formula is based on the premise that you hold tokenA and tokenB of equal value. And In most cases, you may hold unequal assets. For example, you start to hold only one asset, then in order to make the market, firstly you must exchange one asset for another, at this time you will bear the risk of price drop and the risk of impermanent loss at the same time, so your real loss at this time = currency price drop loss + the impermanent loss of the capital pool, so impermanent loss is a part of your real loss, and it is a risk that we cannot ignore. As long as the price fluctuates, impermanent losses will become your real loss.