RE: Logarithmic Volatility Protection: More Impermanent Loss Nonsense

Right, but my understanding is there is an automatic balancer.

This 'automatic balancer' you speak of is just the ratio of x to y coins in the pool.
There is no balancer; the price is always right were it should be: at x to y.
The price of a coin in an AMM pool is always x:y where x is one coin and y is another.

The problem you're having with this concept is that it's being explained to you as if Centralized exchanges are the standard and Uniswap is this weird thing that doesn't make sense. It's being explained as though the price on the centralized exchange is correct and it's the AMM that needs to be balanced.

This is patently absurd and self-centered on the part of the centralized exchanges. The price on UNISWAP is the correct price, and it is actually the centralized exchanges that are wrong. Why? Because the liquidity on a AMM is ALWAYS going to be higher than a centralized exchange by orders of magnitude. There is only one price: the current ratio. And every single coin in the pool is being sold at that price when combined with the slippage algorithm. UNI-SWAP. One swap; one pool. No order book.

This will become more and more obvious as AMM takes over as the superior solution to liquidity issues.

Ok. I guess we have different definitions somehow. You say this:

The problem you're having with this concept is that it's being explained to you as if Centralized exchanges are the standard and Uniswap is this weird thing that doesn't make sense. It's being explained as though the price on the centralized exchange is correct and it's the AMM that needs to be balanced.
This is patently absurd and self-centered on the part of the centralized exchanges. The price on UNISWAP is the correct price, and it is actually the centralized exchanges that are wrong.

And I read this about what Balancer (BAL) does:

Pools are efficiently rebalanced through a multi-dimensional invariant function used to continuously define swap prices between any two tokens in a pool. Essentially, it is an n-dimensional generalization of Uniswap's x * y = k formula.

Whenever market prices are different from those offered by a Balancer Pool, arbitrageurs will make the most profit by trading with that pool until its prices equal those on the external market. When this happens, it cancels out the arbitrage opportunity. These arbitrage opportunities guarantee that, in a rational market, prices offered by any Balancer Pool are identical to the rest of the market.

Like I said, my understanding is that when the pools become unbalanced due to price fluctuations, AMM's will rebalance them by buying and/or selling the assets represented in those pools to even them out again. There is a "formula" they use that creates the "impermanent loss" that will only become permanent if the staker leaves the pool.

Logically, it makes sense. If the price of ETH is 20% higher on Coinbase than it is in my LP, I'd leave the pool and go sell my ETH on Coinbase. But that's not possible because the pool will rebalance itself by selling some ETH and converting it into the other asset so the value of both sides is the same. I'll lose some ETH while gaining some of the other asset. The overall value of the pool will go up but it won't increase by as much as it would have had the 2 assets been held outside the wallet. Impermanent loss.

I guess I would just say that the centralized market prices are NOT wrong. They reflect the buying vs selling pressure IN THEIR PARTICULAR MARKET. If their prices get out of whack with other markets, arbitrageurs will come in and correct it. If I can buy BTC for $54k on Coinbase and sell it for $55k on Kraken I'll short Kraken and long Coinbase in equal amounts until the prices get close enough its not worth the risk.

No market is WRONG. It's simply a reflection of what someone is willing to pay for something and what price someone is willing to sell for.

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