Understanding Impermanent Loss (IL) on QuickSwap’s V3 ‘Concentrated Liquidity’ Model

What is QuickSwap V3?

What is Impermanent Loss (IL)?

Providing liquidity on V3

  • Full rangethe liquidity is used for the entire range. When choosing “Full range” on V3, your LP will be similar to LPing for V2, but instead of earning a share of the flat 0.3% fee the V2 DEX charges, you will earn a share of the variable 0.1–1% fee the V3 DEX charges — depending on the assets’ volatility.
  • Safe — the price must stay between -20% and +40% of the current price to remain within range and earn rewards.
  • Common — the price must stay between -10% and +20% of the current price to remain within the range and earn rewards.
  • Expert — the price must stay between -5.2% and +10% of the current price to remain within the range and earn rewards.
This image shows how the price range changes when you select these different options.

The 2 Cases of Impermanent Loss on V3:

  1. The price goes out of the range
  2. The price varies but remains within the range

V3 IL Type 1: Price goes out of range

  1. What’s the value of your remaining asset?
  2. Plus any earned fees and/or rewards
  3. Then calculate the initial value of the two assets you deposited at their current prices
  4. (a+b)-c = your IL

V3 IL Type 2: Price moves but remains within the range

This image shows how the percentage changed.

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