> For the complete documentation index, see [llms.txt](https://docs.usenest.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.usenest.xyz/liquidity-types/4.5-beating-impermanent-loss-il.md).

# 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. 

{% stepper %}
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### 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. 
> {% endstep %}

{% step %}

### 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. 
> {% endstep %}

{% step %}

### LEVEL 3 — HEV route (automated compounding + HYPE)

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
* The HYPE Engine holds roughly 27% of veNEST supply which its revenue uses to buy HYPE and distribute it to back to veNEST HEV depositers.

> 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). 
> {% endstep %}
> {% endstepper %}

{% hint style="info" %}
See the next page for a full numerical break down of this effect
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