Skip to main content
    Education only. Not financial, tax or legal advice. We never ask for wallet keys or seed phrases.Canadian rules dated October 2026
    DeFiCalculator.caMITEY network · Canadian DeFi maths
    Scenario 1 of 10 · illustrative

    Scenario: you provide liquidity and one token doubles

    Sam deposits $10,000 into a 50/50 constant-product pool: $5,000 of token A and $5,000 of token B. Over the next year token A doubles relative to token B. Sam wants to know whether providing liquidity beat simply holding the two tokens.

    Mitey the yeti weighing a coin in each paw, with a balance scale
    Mitey: The pool did exactly what it was built to do. That's the part to understand first.

    The assumptions

    InputValue
    Deposit$10,000, split 50/50
    Price moveToken A +100% vs token B
    Pool typeConstant product, 50/50
    Horizon365 days
    Fee incomeTested at 0% and 5% APR (illustrative)
    Change the inputs in the calculator

    Step by step

    1. What holding would be worth. Holding, the $5,000 of token A becomes $10,000 and token B stays at $5,000: $15,000.00 in total.
    2. What the pool rebalanced into. As A rose, arbitrage traders bought A from the pool and paid in B, so the pool ended with less A and more B. Its value is $14,142.14 before fees.
    3. The impermanent loss. The difference is $857.86, or −5.72% of the hold value. For a 50/50 pool that matches the formula 2√r ÷ (1 + r) − 1 with r = 2.
    4. Fees needed to break even. To make up $857.86 over a year, the pool would need to pay about 6.07% APR in trading fees on Sam's position.
    5. With 5% fee APR. At an illustrative 5% fee APR the position earns $707.11 in fees and ends at $14,849.24, behind holding by $150.76.

    Same deposit, other price moves (no fees)

    Token A moveHold valuePool valueImpermanent loss
    -50%$7,500$7,071−5.72%
    +25%$11,250$11,180−0.62%
    +50%$12,500$12,247−2.02%
    +100%$15,000$14,142−5.72%
    +200%$20,000$17,321−13.40%
    +400%$30,000$22,361−25.46%
    The takeawayLiquidity provision sells the rising token and buys the falling one. The bigger the divergence in either direction, the more fee income it takes to beat simply holding.

    Questions people ask

    Is the loss permanent?

    It becomes permanent when you withdraw. If prices return to the deposit ratio, the impermanent loss disappears, though price paths rarely cooperate.

    Does a fall hurt as much as a rise?

    A halving (−50%) gives the same 5.72% loss as a doubling, because the formula depends on the ratio between the two prices.

    Names, rates and prices in this scenario are illustrative and computed for education. They aren't forecasts, quotes or recommendations.

    Calculator

    Impermanent loss

    Pool value vs holding for constant-product and stable pools.

    Calculator

    Yield farming

    Headline farm APR vs realised return after the usual leaks.

    Scenario

    a stablecoin in your stable pool loses its peg

    How a StableSwap-style pool fills up with the coin that depegs, why higher amplification makes it worse, and the loss vs holding at several depeg levels.

    Risk hub

    Smart contract risk: what can break when code holds your funds

    How DeFi smart contracts fail, from code bugs and admin keys to inherited dependencies, with a cover-cost example and questions to ask before depositing.

    Next scenario: a stablecoin in your stable pool loses its peg