GK Question

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Which DeFi risk arises from impermanent loss when providing liquidity to volatile trading pairs?

  1. Impermanent Loss
  2. Smart Contract Risk
  3. Oracle Manipulation
  4. All of these

Answer: Impermanent Loss

Impermanent loss occurs when token prices diverge, reducing value vs holding tokens. Critical risk for liquidity providers.

Topic Digital Currencies: DeFi
Exam Relevance Banking, UPSC, SSC
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