GlossaryAdvanced
Impermanent Loss Protection
A mechanism some protocols offer to compensate liquidity providers for impermanent loss.
Impermanent loss protection is a mechanism some DeFi protocols offer to partially or fully compensate liquidity providers for impermanent loss they experience, generally funded through protocol reserves or additional token emissions.
This feature adds its own dependency on the protocol's reserves or token value remaining sufficient to actually honor the promised protection over time.
Examples
- A protocol offering impermanent loss protection funds it from reserves or additional token emissions.
- This protection is only as reliable as the protocol's ability to actually fund it going forward.