4.5 - Beating Impermanent Loss (IL)
Impermanent Loss (IL) is what happens when the two assets in your pool move in price relative to each other, and your LP position ends up worth less than simply holding those assets outside the pool which is a normal part of providing liquidity.
How nest LP users beat IL
nest’s design gives you multiple ways to offset that cost where the more “full-stack” you go, the more your rewards can compound depending on your level of conviction.
LEVEL 1 — Sell LP emissions (basic)
On Nest, LPs earn NEST emissions (if the pool is incentivised). LPs do not earn trading fees.
So emissions are the primary tool LPs use to offset:
IL
volatility
early-market inefficiency
Emissions are vote-directed and change by epoch; CLAMM must stay in-range to keep earning.
LEVEL 2 — Lock + compound (adds fee value on top)
Locking emissions (or bought NEST) into veNEST which adds a second income stream that isn’t “inside the pool”:
100% of trading fee value is allocated to veNEST participants
veNEST also controls where emissions go each epoch, so long-term lockers compound influence over incentives
If you want to stay long-term aligned, auto-max feature exists to help maintain lock strength over time without constantly extending manually.
LEVEL 3 — HEV route (automated compounding + MEGAHYPE)
If you don’t want to vote manually every epoch, you can deposit veNEST into HEV (HYPE Engine Vault):
HEV auto-votes with your veNEST with the highest effieceny possible
~40% of nest fees route into the HYPE Engine, as a result the HEV stakers get MEGAHYPE distributions
MEGAHYPE is designed as treasury-backed, compounding HYPE exposure via NAV mechanics (no liquidation, leveraged HYPE)
IL is a market-making tax — Nest’s whole system is built so emissions + fee value + Engine compounding can outgrow it over time (when adoption + volume show up).
See the next page for a full numerical break down of this effect
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