Recent research shows that impermanent losses have become an increasing issue for liquidity providers on Uniswap v3.
A Nov. 17 report by Topaz Blue and the Bancor Protocol found that 49.5% of liquidity providers on Uniswap v3 have incurred negative returns from impermanent loss (IL).
The report highlighted that Uniswap v3 generates the highest fees of any automated market maker (AMM) today, but IL surpasses those earned fees. The research surmised that hodling may have been a better option for liquidity providers.
“The average liquidity provider (LP) in the Uniswap V3 ecosystem has been financially harmed by their choice of activities and would have been more profitable simply holding their assets.”
Impermanent loss is a phenomenon that occurs to liquidity providers on automated market makers (AMMs) when