If you may need both tokens soon, compare the pool’s price risk with its fees before you deposit. Impermanent loss is the difference between keeping your tokens and putting them into a liquidity pool, where traders swap against a shared token reserve.
Impermanent loss depends on how token prices move
A pool can earn swap fees and still leave you with less value than holding the same tokens. These four points explain why:
- Your deposit usually contains two tokens.
- The pool changes its token amounts as prices move.
- Fees may offset some of the difference.
- You see the final result when you withdraw.
In a typical equal-value pool, you deposit the same dollar value of each token. Biswap lets you add token pairs from your wallet, so you can review the pool’s terms before confirming. Its pool then holds your tokens for traders to swap.
Here is an example. Say you deposit 100 tokens A and 100 tokens B, each worth $1. If A’s price doubles, traders adjust the pool until it holds about 70.7 A and 141.4 B. Those amounts are worth about $282.80 together.
If you had held your original 100 of each, they would now be worth $300. The pool’s roughly $17 difference is impermanent loss: a comparison with holding, before fees. The pool uses a constant-product rule, often written as x × y = k, to keep the reserves in balance as trades happen.
The loss is called impermanent because prices can move back, shrinking the gap. It becomes part of your outcome when you withdraw. Swap fees can make up some or all of it, but they are not guaranteed to do so.
Check the pool and wallet steps before depositing
Before you add funds, check the pair, the pool’s fee rate, and whether you can accept price changes in either token. A token with a sharp price rise or fall can create a bigger gap against holding. Biswap shows pool choices; compare the pair and terms before choosing one.
For a first deposit, connect your wallet, choose the pair, and enter the amount. The page shows the other token amount and your estimated share. Your share is your portion of the pool, and it can change as people add or remove funds.
Your wallet may ask you to approve each token before adding it. Approval lets the exchange use that token up to the amount you allow; it is a separate transaction and may cost a network fee. Review the token names and amounts, then confirm the deposit. Network fees vary with blockchain traffic and are paid in its network token.
Questions to answer before you choose
Can fees make up for impermanent loss?
They can, but the result depends on trading activity, your share of the pool, and how far prices move. Fees accrue as traders swap, while price changes keep affecting the token amounts. Compare fees earned with the value you would have had by holding; a fee rate alone cannot predict your return.
When should I withdraw?
Withdraw when you need the tokens or no longer accept the pool’s price risk. Check the amounts and estimated value shown before confirming. If you want to compare your result with holding, use the token amounts you deposited and their current prices, then account for fees and network costs.
For a first pool on Biswap, start with an amount you can leave deposited through price swings. Check the pair, fees, and withdrawal amounts before each decision.