Comment by @huncho • Hey
still not really wrapped around the meaning of impermanent loss and how it works
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It's hard one but try this... If you enter an AMM as an LP with 1 apple + 2 oranges, and later due to the changing price of Apples : Oranges, you end up withdrawing weeks later and now have 1.25 apples + 1.75 oranges. That's impermanent loss. You lost some oranges but had you stayed in the LP and the price never changed, you would have been able to exit with 1 apple + 2 oranges + some trading fees hopefully. The IL in the LP is compared to what you would have had, had you simply held the 2 tokens outside the AMM--in this case an IL = 0.25 oranges.