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What are the losses that liquidity providers may experience when the exchange rates for token trading pairs on a DEX increase significantly?

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In this guide, you’ll learn the answer to “What are the losses that liquidity providers may experience when the exchange rates for token trading pairs on a DEX increase significantly?” in OverWallet.

What are the losses that liquidity providers may experience when the exchange rates for token trading pairs on a DEX increase significantly?

Question: What are the losses that liquidity providers may experience when the exchange rates for token trading pairs on a DEX increase significantly?

Answer: Impermanent Loss (IL).

Further reading

What do we call the entity that provides liquidity to the liquidity pool on a DEX?

What do we call the token trading pairs that DEX creates for AMM?

What is the ordering method used in DEX instead of the order book called?