Medium Article from Shreemoy Mishra: Impermanent Loss is Inevitable in AMM DeFi Protocols — and that’s totally fine

Hello RSK Community! One of RSK’s researcher, Shreemoy Mishra published this interesting article, he wrote about the following:

  • Why providing liquidity to constant product AMM DeFi protocols necessarily involves some impermanent loss.
  • Change in asset prices
  • Opportunity cost of providing liquidity

The issue I’ve found in AMM’s based in RSK is that RSK atracts a majority of bitcoiners, so if you provide liquidity to double-sided pools like ETHs/RBTC you are passively trading against this bitcoiners market which is something a bitcoiner absolutely do not want.

I’m totally fine trading against a big market full of alt-coiners but not this. So the only solution is to provide liquidity to single-sided pools and provide only RBTC

let me know what do you think, if I’m wrong and why


Hi! Thanks for your comments. You are not wrong. Network peers who feel strongly about that may end up choosing to limit their interactions to single-sided pools and assets strictly within the RSK ecosystem: e.g. RBTC, DOC, SOV, RIF etc.

This post was about a particular aspect of AMM’s, and it implicitly assumes that the assets being pooled and traded are on the same chain (even if they may be derivatives from other chains). So in that sense, there is no conflict with bitcoiner ethos.

However, there is considerable interest in cross-chain and multi-chain use cases (e.g. for payments or trading). So we’ve seen people, across the ecosystem, building bridges to create richer experiences. I think that’s a net positive for RSK.