LP fees can be positive while your position still underperforms simply holding.
That’s Impermanent Loss (IL) one of the most important concepts to understand before providing liquidity.
Here’s a simple example:
You start with:
10 GRAM + 100 USDT = $200
GRAM = $10.
Then GRAM rises to $40.
If you simply hold:
10 GRAM = $400
100 USDT = $100
Total = $500
But in a constant-product AMM, traders buy GRAM as its price rises, changing the pool’s balance.
Your position could become:
5 GRAM + 200 USDT = $400
So, before fees:
Hold → $500
LP → $400
The $100 difference is underperformance relative to simply holding that’s the basic idea behind IL.
But there’s another side.
LPs can earn trading fees, which may offset some or all of that underperformance.
They are not guaranteed to.
So don’t think:
❌ LP = free yield
Think:
✅ Potential fees in exchange for additional market risk.
The key risk is price divergence between the assets.
If the relative prices change significantly, IL can increase.
And if you exit while that divergence remains, the loss becomes realized.
Remember:
Fees are the potential reward.
Price divergence is the risk.
Understanding that trade-off is what separates simply using DeFi from actually understanding it.
Would you rather earn LP fees with IL risk, or simply hold the assets? Why?
#DEFİ #liquidity #GRAM #TON $GRAM $BNB $SOL