Risks & safety
Providing liquidity is not free yield. You are taking real positions with real ways to lose money, and a fast UI that hides that is worse than no UI. This page is the honest version: what the risks are, and what the app checks so you can see them coming.
Impermanent loss
The one every LP has to understand. When you provide two-sided liquidity and the price moves, the pool sells you out of the side that went up and into the side that went down. You end up holding more of the loser. Impermanent loss is the gap between what your position is worth and what you would have had if you had simply held both tokens and done nothing.
- It grows with how far price moves, not how fast. A round trip back to where you started erases it, which is why it's called impermanent.
- It becomes permanent the moment you withdraw at a different price than you entered.
- Fees are what you are paid for taking it. A position is profitable when the fees it earned exceed the divergence it suffered, which is why a busy pool at a tight range can beat a quiet one, and why an out-of-range position earning nothing is the worst of both.
- Concentrating your range amplifies it. Tighter means more fees while price is inside, and a faster, larger conversion into one token when it leaves.
Going out of range
A concentrated position only earns while price is inside its band. Outside it, your capital has fully converted into one of the two tokens and sits idle, still exposed to that token's price, but earning nothing. The portfolio marks this plainly on every position and tells you which side price left on, so “why has this stopped earning?” is never a mystery. See managing positions for what to do about it.
The token itself
Most money lost around AMMs isn't lost to impermanent loss. It is lost to the token going to zero, or to a contract that was never going to let you leave. lp.xyz pulls the signals for that into the token's header before you act on it.
- Authorities
- Can the supply still be minted? Can your balance be frozen? On EVM, is the contract verified, is it pausable, has ownership been renounced? An unrenounced mint authority means the supply you're pricing against can change.
- Liquidity
- How deep the pools actually are, and whether the LP tokens are burned or locked. Deep liquidity you can't trust to stay is not depth.
- Concentration
- What share the top ten wallets hold, plus dev, sniper and insider cohorts. A token whose float is a handful of wallets can be moved by any one of them.
- Age & activity
- How long the token has existed and whether the volume is many wallets or one trading with itself.
These roll up into a single verdict on the token's page. It is a summary of public on-chain facts, not a rating and not advice. A clean verdict means nothing was flagged, not that the token is a good idea.
Unknown is not the same as safe
When a check can't be answered (an unverified contract, a data source that didn't respond), lp.xyz says it doesn't know. It never renders a missing answer as a passing one. Treat a blank the way you would treat a warning, because that is what it might turn out to have been.
Where lp.xyz can and can't protect you
The app is non-custodial: it builds transactions and your wallet signs them, so it can never move your funds, and a bug on our side cannot spend your money. What it also means is that a transaction you approve is final. lp.xyz can show you the cost, the price impact, the risk flags, and refuse to offer an action a pool can't do, and it does all of that. It cannot undo a signature, recover a key, or make a falling token stop falling.
- A risky token is never hidden from you. People already holding it need to be able to reach it to get out, so the app warns loudly and still lets you through.
- Costs are shown before you sign, not after. Every platform fee is already inside the quote you approve.
- Automation maintains a position; it does not judge whether you should be in it.
- Back up your trading wallet's key. It is yours, held in an enclave for you, and nobody at lp.xyz can recover it if you lose your access.