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One of the risks associated with DeFi, or decentralized finance, is impermanent loss. This is a temporary loss of funds that can occur when providing liquidity to a liquidity pool. Automated market makers, such as Uniswap, use liquidity pools for exchanging one asset for another. When the initial price of the tokens that the liquidity provider provided to the pool deviates from the current global price of those tokens, an arbitrage opportunity arises, resulting in lost capital for the LP.