Read on Twitter
1/ New AMM @BreederDodo (intuitive name) launched recently. Claiming they solved impermanent loss. Most people don't really know what IL and frequently describe it wrong. So I'll clear it up. IL is when the $ value of the assets you provide liquidity for is LESS than
2/ if you just held the assets and didn't provide liquidity. For example, if you provide 100 ETH and 100 DAI worth $200 when you add liquidity (example only). 1 month later 100 ETH and 100 DAI is worth $200, and you withdraw your assets and in aggregate they are still worth $200
3/ you don't have IL. If the mix of the assets change and you have 50 ETH and 150 DAI worth $200, you again don't have IL. You can simply swap the coins and restore the 100/100 mix. Most people refer to this as having IL, but it is not, IL is difference between the aggregate
4/ value. Now if there is single-sided liquidity it is more straight forward. Did you lose the amount of coins when you withdrew liquidity? If yes, you have impermanent loss, except it is permanent. Now DODO has claimed they solved IL, except they don't call the scenario above IL
5/ (which is how the entire industry describes it), instead they call it "market risk". That is some absolutely incredibly shady and disingenuous word-smithing.
6/ It is most common in volatile scenarios when one asset price moons and the CFMM attempts to restore the 50/50 mix of the assets. Arbitragers are quick to exploit pricing differences in the pool and essentially steal value from LPs, which results in IL.
7/ But it is not really impermanent. Ask @worthalter if he experienced "impermanent" loss providing liquidity for $RPL when it mooned 100% in one day. A deeper look through DODO's documents and they admit they didn't eliminate the scenario everyone else calls IL, even though
8/ though they claim they did. They partially offset this by providing DODO tokens as LP incentives. Now I expect every seed investor to call this total bullshit (gotta protect their baggies).....I still expect it to trade at $1-5 out the gate.
9/ It has to do with the speed the oracles update the prices in the pool. Arbs are constantly working faster and bleeding the LPs dry. Ask $YFI LPs if they experienced losses over the last week. So, DODO solved IL by replacing it with permanent loss. Congrats on this, seriously.
