IL Insurance
Protection Against Impermanent Losses on THORchain
What is Impermanent Loss
Impermanent losses are capital losses that eat into a liquidity provider's capital making it more profitable for assets to have rather been held. So if a regular make more over a period of time than an LP pooling the same asset, the LP has suffered impermanent losses.
Impermanent losses come about as fluctuations in pool asset prices which are taken advantage of by arbitrageurs incentived to equal the pools. The solution is impermanent loss protection (ILP).
ILP guarantees that you will always be better off in capital when withdrawing funds from the pool. In this publication, we want to get insights into the payment of IL insurance in THORchain pools.
As you can see, 92% of withdrawals did not come with IL insurance which means that the LPs made profits. About 8 received IL insurance totalling 4,671 USD.
Now let's look at IL statistics at a high level, which is presented in the table below.
Now, which of the pools have the most IL insurances been paid? Mind you, this data will also give a fair idea of pools most susceptible to impermanent losses.
28.9% of all IL Insurance has been paid to LPs of the ETH.ETH pool, 20.6% have been paid to the ETH.RUNE pool and 16.3% has been paid to the BNB.BUSD pool. The remaining pools and their respective percentages can be observed in the donut chart right above.