The temporary loss of value experienced by liquidity providers when token prices in a pool diverge from their deposit ratio. The loss becomes permanent only if you withdraw at unfavorable prices. Greater divergence means more loss.
The temporary loss of value experienced by liquidity providers when token prices in a pool diverge from their deposit ratio.
The loss becomes permanent only if you withdraw at unfavorable prices.
Greater divergence means more loss.
This is a key building block of decentralized finance. Understanding it helps you navigate DeFi protocols safely, evaluate yield opportunities, and avoid common pitfalls.