Risks and Impermanent Loss

Impermanent loss (IL) is an inherent risk associated with providing liquidity to any AMM, including Ouija. In Ouija's context, IL risk arises in two scenarios:

1) Unfavourable changes in oracle prices leading to a decrease in the pool's overall valuation. 2) Withdrawals from a pool with a low health factor, resulting in significant slippage for the liquidity provider.

Thankfully, some IL will be mitigated by the actions of arbitrageurs. As arbitrageurs balance and increase the overall HF of the pool, they will inherently increase the ratio of pegged assets to non-pegged assets. This results in less IL as the value of the pool will shift much less with market volatility.