Impermanent loss

Impermanent loss (IL, divergence loss) is the “missed profit” of a liquidity provider compared to a scenario where they would have simply held both tokens of the pair in their wallet. The further the prices of the two pool tokens diverge, the higher the IL. The word “impermanent” means temporary — if prices return to their original ratio, the IL goes back to zero.

Where it comes from

In a CPMM pool, the invariant x * y = k is enforced. When the external market price of one token rises, arbitrageurs enter the pool, buy out the appreciating token, and leave the cheaper one behind. The pool automatically rebalances to a new ratio.

From the LP’s perspective this means: at exit, the share of the “appreciated” token in their position is smaller than it would have been under a simple hold. Part of the upside has gone to the arbitrageurs.

A simple numerical intuition

Suppose you deposit 1 TON and 5 USDT into a pool when 1 TON = 5 USDT. You hold 1% of the pool.

• The TON price doubles to 10 USDT.
• Arbitrageurs shift the pool reserves so the ratio matches the market. Your share now holds roughly 0.71 TON and 7.07 USDT instead of 1 TON and 5 USDT.
• In dollar terms, your position is worth about 14.14 USDT.
• Had you simply held 1 TON and 5 USDT, you would have 10 + 5 = 15 USDT.
• The difference is about 0.86 USDT, or roughly 5.7%. That is impermanent loss at a 2x divergence on one side.

The exact CPMM formula ties IL only to the price ratio at start vs current. At a 2x divergence IL is around 5.7%; at 4x — about 20%; at 10x — about 42%.

When IL becomes permanent

The word “impermanent” is misleading. IL does indeed reset to zero if prices return to their original ratio. But if the LP exits the pool while prices have diverged, the loss is locked in — it becomes very real. In practice, most users exit precisely at the wrong moment (the pair has already moved one way), so in real life IL is permanent more often than temporary.

Is it offset by fees?

Yes, partially. While IL accrues, the pool also collects swap fees and emissions (if there is farming). If the cumulative fee income over the holding period exceeds IL, the LP still ends up ahead of holding. This arithmetic is worth modeling before entering the pool, not after.

A rough rule of thumb for a CPMM pair without farming: breakeven against holding occurs when the average daily fee APY covers the IL implied by the expected price range. On a TON/USDT pair with moderate volatility, this requires meaningful trading volume.

How to minimize IL

• Stablecoin pairs. USDT/USDC, USDT/jUSDT — prices barely diverge, IL is close to zero. Yields are lower, but so is risk.
• Pairs with similar volatility. TON/LST (for example, TON/tsTON) — both sides move almost in sync, IL is minimal.
• Concentrated liquidity. In CLMM pools the LP picks a price range. If priced correctly, fee income is higher for the same IL — but if the price exits the range, IL is locked in with no chance to recover.
• Avoid entering at peak volatility. If a large move is expected, a classic CPMM pool is not the best place to deploy capital.

What to keep in mind

IL is not “the exchange stole your money” — it is a natural consequence of an AMM rebalancing reserves by formula. It is the price you pay for serving as counterparty to every swap in the pool. Whether that price is worth the fee income depends on the pair, volume, and time horizon.