represents the amount of token B in the pool. This formula intends to create a price range for both tokens with respect to their quantities available in the pool. To maintain constantwhen the supply of either token increases, the supply of its counterpart in the pool must decrease.If a user exchanges or buys BUSD with ETH, the number of BUSD in the pool decreases while the number of ETH increases.
As LPs, you withdraw the same amount of token deposited, but its worth to the corresponding token would have dropped.How to Calculate Impermanent Loss Imagine a Bruno has 7 ETH and intends to contribute liquidity to a 50/50 ETH/BUSD pool. He has to deposit 7 ETH and 13,020 BUSD—assuming 1 ETH=1,860 BUSD.
So when LPs deposit their assets to a pool, they will get the liquidity pool's tokens. These tokens are based on LPs' share of the pool, and they will be used to withdraw their share or percentage of the pooled asset any time they want to.
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