Is there impermanent loss for the technique including liquidity pool a couple of occasions at completely different value factors and stop liquidity at one level of the completely different value factors.
Anyone ask me a fascinating query that “I added to a liquidity pool a couple of occasions at completely different value factors… I’m having bother arising with an exit technique. Say for instance I added 100k at 0.05, 100k at 0.04 and 100k at .03…. I’d need to exit the pool at .04 to have little to no impermanent loss?”
The query is superb. Perhaps many individuals assume it’s a technique to cut back impermanent loss due to including lower cost to cut back liquidity price. Nevertheless, this view is a misunderstanding of impermanent loss.
As everyone knows, the calculation method of impermanent loss is:
For those who added 100k at 0.05 for the place 1, 100k at 0.04 for the place 2 and 100k at .03 for the place 3…. I’d need to exit the pool at .04.
The impermanent lack of place at 0.05 il1=
The impermanent lack of place at 0.04 il2=
The impermanent lack of place at 0.03 il3=
So your whole impermanent loss= il1+ il2+ il3 <0, clearly you’ll endure impermanent losses.
It is a very fascinating phenomenon. Any new including liquidity conduct can’t cut back the impermanent losses. However what can we do to cut back impermanence losses for this technique?
Here’s a technique to realize it. After you added 100k at 0.05, 100k at 0.04 and 100k at .03,after which exit 100k at 0.05, 100k at 0.04 and 100k at .03 respectively. For this example,
The impermanent lack of place at 0.05 il1=
The impermanent lack of place at 0.04 il2=0
The impermanent lack of place at 0.03 il3=0
So your whole impermanent loss= il1+ il2+ il3 =0
Because of this, you may obtain zero impermanence loss with the above technique. After all it’s also possible to obtain zero impermanent loss and single asset yield farming by our X3 protocol deployed on the Polygon testnet,
https://x3finance.medium.com/is-there-impermanent-loss-for-the-strategy-adding-liquidity-pool-a-few-times-at-different-price-517a4abfe93e
