Thoughts On Impermanent Loss?

Hey there folks!

First off, I’d like to say a big THANK YOU to Hayden Adams and the Uniswap core devs for seriously making financial history. Uniswap is an amazing step towards decentralization of core financial services, and I can’t wait to see where it is in a few years! (Finance student here :laughing:)

Anyway, I was wondering if anyone here had any thoughts relating to impermanent loss.

Should Uniswap governance work towards mitigating impermanent loss through means like oracles (Bancor V2 I believe) or another creative solution?

Let’s have a discussion!

P.S. I’m not actually that well versed in how smart contracts work, including technical limitations of running on chain. If this isn’t possible, let me know!


My understanding of impermanent loss is that it is the risk of providing liquidity. Reducing this for liquidity providers, will probaly reduce the liquidity.

It might be a necessity, you’ve got a good point. Another way to look at impermanent loss would be an overall reduction in relative volatility. Interested to hear what other community members have to say!

This is a lot more nuanced. I’m retracting this statement, impermanent loss happens on both sides, but it isn’t the only factor in the equation.

I’ve thought about it a little, and, that’s why held off on putting any UNI into an LP right away. Anyone that added liquidity early on to ETH-UNI, or really any UNI pool is just losing UNI as the price rises so fast in relation to the other in the pair at this point. I want to keep my UNI! Maybe add liquidity one day, if the price (somewhat) stabilizes, or, maybe if rewards are offered in an ETH-UNI pool. But even that’s still a maybe. I’d rather just hold the UNI, and be able to vote, and other things.

What exactly are the creative solutions, with oracles, or others?

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