Yield Basis: How to Solve Impermanent Loss

Why Impermanent Loss Still Matters

Impermanent loss occurs when the value of your assets in a liquidity pool underperforms simply holding them, especially during price swings. This occurs when the liquidity pool rebalances to reflect the new price, changing your exposure to the underlying assets.

Yield Basis changes that by using compounding leverage to align LP performance directly with the underlying asset's price, effectively letting liquidity providers behave more like directional traders while still earning yield.

This results in a more capital-efficient and higher-yielding way to provide liquidity, without having to worry about price changes affecting your returns.

Implications for Curve and the Future of DeFi

For Curve, Yield Basis reinforces the protocol’s role as the most advanced engine for onchain liquidity. By enabling LPs to participate in impermanent-loss-free strategies, it opens the door for a new wave of capital to provide liquidity capital that may have previously sat on the sidelines.

For users, Yield Basis offers a new way to earn yield while maintaining price exposure, combining the benefits of holding assets with additional fee revenue from trading. It introduces a compelling new way to "stake" your volatile assets, perfect for long-term holders.