# Smaller Divergence Loss

## Divergence Loss

In traditional AMMs such as Uniswap, Sushiswap, etc, the volatility of price changes can severely diminish the returns for liquidity providers, causing a significant DL(Divergence Loss, often referred to as 'Impermanent Loss' by other DEXes) for LPs. <mark style="color:red;">To explain in simpler terms: you make less profit when the token price hikes, your loss is enlarged when token price drops due to Divergence Loss in traditional 2 sided AMMs</mark>

There is still divergence loss in OT only when the price of the token grows, there is 0 divergence loss when token price drops and OSD rebalance involves, plus single token liquidity provision increases capital efficiency and lowers overall divergence loss as a result. <mark style="color:red;">For select pool LPs, providing liquidity to</mark> OT <mark style="color:red;">won't enlarge your loss when token price drops.</mark>

![](https://3227338076-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2Fn262PLtizMqtNJu9DRnQ%2Fuploads%2FLc1LEoWhS5T9TNUQHPJj%2Fimage.png?alt=media\&token=4d03c39e-e2a5-4934-a417-be122e26eff8)

DL = *(ValuePool - ValueHODL)/ValueHODL \* 100%*

***ValuePool** = Value of your portfolio added to the pool at current price*

***ValueHodl** = Value of your original portfolio at current price(Assuming you've always held it without adding to liquidity pools).*

*DL is the difference that providing liquidity to the pool makes to your portfolio value. In above examples, divergence loss is smaller when ETH price moves upwards, <mark style="color:red;">there is 0 divergence loss when ETH price drops</mark>.*&#x20;

ETH liquidity providers also get a share of perpetual trading fees and funding fees for positions opened using ETH as margin.