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Wednesday, March 22, 2023

Impermanent Loss On Avalanche Has Been Fixed With New Fix

In times of market turmoil, Trader Joe claims that its Liquidity Book will lessen the temporary loss of avalanche saying that it suffered by so many liquidity providers on other DEXs.

According to Trader Joe, one of the main flaws in the avalanche-based decentralized finance (DeFi) protocol, the impermanent loss may be addressed.

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The developers described the use of Liquidity Book (LB) with an additional variable fee swap feature to “provide traders with zero or low slippage trades” in a newly published white paper on Tuesday titled the JOE v2 Liquidity Book, which was written by Quant developers and researchers Adam Sturges, TraderWaWa, Hanzo, and software engineer Louis myself.

According to Trader Joe, the new approach will lessen the transient loss “suffered by so many liquidity providers (LPs) on other DEXs amid market instability.”

New Fix Can Help Impermanent Loss On Avalanche: 

Impermanent loss occurs when a token’s price fluctuates after being deposited in an automated market maker with a liquidity pool as part of yield farming, an investing strategy in which one lends tokens to receive incentives. This has been viewed as one of DeFi’s biggest vulnerabilities.

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According to Markus Thielen, a chief investment officer of digital-asset management company IDEG, it’s also one of the reasons institutional investors have been treading carefully in the DeFi area. They think it will fix the impermanent loss in Avalanche.

The article claims that Trader Joe’s Liquidity Book (LB) is a particular kind of liquidity pool (LP) that divides the liquidity of a pair of assets into price bins that are traded at a fixed price.

To better manage liquidity in reaction to abrupt price changes, the LB adopts a new variable swap fee to shield traders from temporary loss by compensating LPs in the event of significant market volatility.

To provide traders with better buying rates, Trader Joe’s LB will also provide zero to low slippage trades.

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