- 7 Min Read

Let us first clarify in which cases you might face impermanent loss. Most decentralized exchanges are automated market makers (AMMs). It is the most common form of a decentralized exchange first developed by Bancor where the asset price is not defined by an order book but a mathematical formula. The most used formula is “x * y = k”, where “x” is the amount of token 1 in the liquidity pool, and “y” is the amount of token 2 and “k” is a fixed constant, meaning the pool’s total liquidity always has to remain the same leading to pools consisting of the equal r… Read More