Liquidity providers
LPs lend neither a fixed quantity nor a guaranteed return: they hold a claim on inventory that traders continually reshape.
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THE INTERACTIVE FIELD GUIDE
Track the inventory inside an LP position.
Reprice the market and compare a rebalanced constant-product position with holding its original two assets.
Enable JavaScript to use this simulation. Read its assumptions and related explanations below.
READ THE MODEL
Assumptions & scope
- Equal starting value in two assets, full-range constant product, and complete arbitrage to the new market price.
- The quote asset remains worth one quote unit; fees, incentives and gas are excluded.
- Divergence versus holding = 2√r / (1 + r) − 1, where r is the final / initial token price.
- Prices must be positive; a worthless-token collapse is outside the finite-equilibrium model.
Hayden Adams, Noah Zinsmeister, Dan Robinson · Uniswap v2 Core ↗Checked 13 Nov 2026
Understand the moving parts
All labs ↗LP inventory and divergence loss
Divergence loss compares a pool position with holding its original assets. It is a benchmark difference, not a separate fee.
Automated market makers
A liquidity pool quotes exchanges from its reserves and a pricing rule instead of waiting for a matching order.
Yield farming and incentives
A displayed yield can combine fees, interest and token subsidies. Trace each source before combining the numbers.