Impermanent Loss
Impermanent loss is the opportunity cost a liquidity provider suffers when the prices of the two pooled assets diverge, leaving them worse off than if they had simply held the assets. In a time-decay AMM for Principal Tokens, impermanent loss trends toward zero for LPs who stay until maturity because the PT price converges predictably to par.
Impermanent loss happens when pooled asset prices move apart: the AMM rebalances you into more of the falling asset, so you end up with less value than holding. It is "impermanent" because it reverses if prices return.
Spield’s time-decay AMM largely neutralizes this: a PT’s path to par is predictable, so an LP held to maturity faces minimal divergence while still earning fees.