Impermanent Loss
HyperAMM eliminates Impermanent Loss (IL) through full delta hedging. Here's how, and what residual risks are left.
What is IL?
In traditional AMMs, LPs lose value when token prices move away from entry. The constant product formula means arbitrageurs trade against the pool to correct prices, extracting value from LPs in the process.
For Uni V3 concentrated positions, IL can be brutal — a 2x price move on a tight range can wipe out most of your position.
How HyperAMM Eliminates It
Three things kill IL at the source:
- No bonding curve — Prices come from oracles, not reserves. No arb opportunity.
- Atomic hedging — Every swap is hedged on Core perps within the same transaction.
- Continuous reconciliation — Keepers monitor and correct hedge drift.
Result: LP positions hold their value regardless of price moves. You just collect trading fees.
Residual Risks
Hedging eliminates IL, but small risks remain:
| Risk | What happens | How big |
|---|---|---|
| Hedge lag | ~800-1000ms between swap and hedge fill | Very small |
| Partial fills | Hedge may not fill completely | Small, Reconciler fixes it |
| ADL | Core force-closes positions in extreme conditions | Rare |
| Funding costs | Ongoing funding payments on perps | Varies with market |
| Liquidation risk | Core collateral becomes insufficient | Protected by safety margins |
These are a fraction of the IL you'd see in a traditional AMM.
Numbers
| Scenario | Uniswap V3 LP (tight range) | HyperAMM LP |
|---|---|---|
| 10% price increase | ~0.6% loss | ~0% (hedged) |
| 50% price increase | ~5.7% loss | ~0% (hedged) |
| 2x price increase | ~29% loss | ~0% (hedged) |
Approximate. V3 values depend on range width.
- Delta Hedging — Hedging mechanics in detail
- Security Risks — Full risk disclosure