Liquidity providers on automatic market makers (AMMs) are subject to Impermanent Loss (IL): an excess loss that occurs when the price ratio of paired tokens diverges. As the price of each asset goes up or down relative to the paired token, the ratio of the underlying tokens will automatically rebalance to maintain equal price weighting. Whenever this rebalancing happens, however, there is an excess loss, which is called "impermanent" because it will be erased if the ratio between the underlying tokens reverts to the ratio at the time of deposit. Impermanent Loss is therefore defined as the difference between the value of LP tokens vs. the theoretical value of the underlying tokens if they had not been paired.