Yearn Finance Founder Andre Cronje Experimenting With a Solution to Impermanent Loss

Those experienced with Decentralized Finance will know that providing liquidity comes with its set of risks. Particularly, Impermanent Loss can be one of the annoyances for liquidity providers.

For those new to Decentralized Finance or providing liquidity, an over-simplified way to look at Impermanent Loss is as follows. In the classic form of two token liquidity providing, Essentially Impermanent Loss occurs when someone provides tokens in a liquidity pool (on Uniswap or SushiSwap, for instance), and the amount of each respective token shifts from the time they provided liquidity. One could start with 2 ETH and 597 SUSHI, for instance, and end up in the future with less ETH and more SUSHI, or vise versa. The exact change is Impermanent Loss. There are other forms and methods with a single token but we will not delve too much into those other uses here.

What is most interesting is that Andre Cronje, Founder of Yearn Finance, is experimenting with a way to stop the single-sided liquidity loss on SushiSwap’s Automated Market Makers. While this would not necessarily solve all of the problems related to Impermanent Loss for all liquidity setups, it is a step in the right direction. This could in the future be expanded to other forms of liquidity pools to solve more impermanent loss for other liquidity providers.

As of the time of writing, the exact usage or economics of how the SIL token, the token Andre is believed to be testing, is not clear.

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