Impermanent Loss
AMM liquidity provider loss when pool token prices diverge.
IL: AMM LPs lose when token prices diverge. Auto-rebalancing leaves you with more cheap token, less expensive vs HODL. 'Impermanent' is misleading, only zero if price returns, usually doesn't.
In plain words
When you deposit a token pair (ETH + USDC) into a DEX pool, you earn fees from every swap. But if ETH price moves a lot vs USDC, the pool's auto-rebalancing leaves you with less of the expensive token than if you'd just held both separately. That gap is the impermanent loss.
Example
ETH/USDC pool: add 1 ETH (3000 USDC) + 3000 USDC. ETH 2x to 6000. Withdraw: 0.71 ETH ($4243) + $4243 = $8486. HODL: $9000. IL = $514 (-5.7%). Fees must cover this.
Also known as: IL, impermanent loss, divergence loss