RE: New experiences, branching out - Balancer looks awesome.

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You are right, trading fees for liquidity providers do accumulate with time. The reason you lost money is because of impermanent loss.

To understand how impermanent losses work fully, I would suggest reading some stuff online, google it. But i will still explain it quickly.

Basically, if you are providing liquidity for ETH/WHIVE, the more the price of ETH/HIVE pair moves, the more money you lose. This is how uniswap allows instant liquidity.

For example, if 1 ETH = 1600 HIVE when you added liquidity, and then ETH goes up but hive doesn't, so that now 1 ETH = 1700 HIVE, you will lose a bit of money. But this money is not lost forever, it is only lost as long as the price is not the same as it was when you first provided liquidity. If the price goes back to 1 ETH = 1600 HIVE, you get all the money back.

The fees, however are a separate thing and accumulate on their own. They are only related to the volume of trading on uniswap.

So basically, if the ETH to HIVE price ratio remains constant, it's better for liquidity providers. Otherwise, you get some impermanent loss.



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Thanks for the help with this. These little investments I'm making are just for fun really, and to learn how this all works. Impermanent Loss is now something else to consider, and I appreciate your input.

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