Safety against Impermanent Loss

Changes in price ratios can have a negative impact on users investing in liquidity pools by using liquidity mining. DeFi 2.0 protocols are working on development of new methods for resolving the risks of impermanent loss. DeFi 2.0 users have to work with the protocol for creating token pairs. If one user adds a token to the liquidity pool, the protocol would also add the native token for balancing the pair. It is important to note that the user and the protocol can receive fees for the swaps associated with the concerned pair. The protocol can use the fees generated for creating an insurance fund to safeguard against impermanent loss.