Impermanent Loss Calculator
Cryptocurrency is, underneath the noise, two genuinely new ideas glued together: a shared ledger that no single bank or company controls, kept honest by a network of computers rather than an institution, and money that is programmable — value that can carry its own rules and move without a middleman approving it. Out of that second idea grew decentralized finance, or DeFi, which rebuilds familiar tools — lending, trading, earning yield — as open programs called smart contracts that anyone can use. The most novel of these is the automated market maker: instead of matching buyers to sellers, an exchange holds two pools of tokens and prices trades by a simple formula, and ordinary people supply those pools. Deposit an equal value of two tokens and you become a tiny exchange, collecting a slice of every trade as a fee. It sounds like free income, and the jargon — staking, yield farming, LP tokens, APYs in the double digits — is built to make it sound that way. But there is a cost almost nobody explains up front: impermanent loss. Because the pool automatically rebalances toward whichever token is falling, a price move leaves your stake worth less than if you had simply held the two tokens and done nothing — and it loses whether the volatile token pumps OR dumps. The simulator makes the trade-off concrete: it plots what you'd have by holding versus what you'd have by providing liquidity, as the price moves and as your fee yield accumulates. The lesson is not 'crypto bad' or 'crypto good' — it is that DeFi yields are payment for taking on risks, impermanent loss chief among them, and a headline APY means nothing until you weigh it against the loss the price moves will cost you. The same habit that protects you everywhere else in finance applies here, only more so: when a return looks free, find the cost, because in crypto it is usually larger and better hidden than anywhere else.
Free and interactive — no sign-up, nothing to install. Read the full lesson for the plain-language explanation.