@stonfi Introduces Impermanent Loss Protection: A Game-Changer for Liquidity Provider
Impermanent loss occurs when the price of tokens in a liquidity pool changes relative to each other. When liquidity providers (LPs) deposit two assets into a pool (e.g., ETH and USDT), and one asset's value rises significantly, the pool will rebalance to maintain equal value of both assets. As a result, LPs end up with more of the depreciating asset and less of the appreciating one, leading to a loss when they withdraw their funds. While LPs earn transaction fees, these rewards may not always outweigh the loss from price divergence.
Impermanent loss has long been a significant concern for DeFi participants. However, new solutions like @stonfi Impermanent Loss Protection are helping to mitigate this risk, encouraging more users to provide liquidity and boosting the overall DeFi ecosystem.