LVR is the number IL was hiding from you

Impermanent loss measures the wrong baseline. Loss-versus-rebalancing prices what arbitrageurs actually take from LPs each block — and it is consistently larger than the IL figure most dashboards quote.

Why IL undercounts

IL compares an LP to simply holding the two tokens. But the relevant counterfactual is a continuously rebalanced portfolio at the true price. The gap between that portfolio and what the AMM delivers is LVR, and it is what sophisticated market makers actually optimize against.

For a constant-product pool, LVR scales with the variance of the price process. Fees are the LP's only offset; whether LPing is profitable is the question of whether collected fees out-earn LVR over the holding period.