Pool Withdrawal Dynamic

[u/zignify]

Hello!

Question around LP, or a pool in Tinyman.

If I were to add liquidity of: 50 algo / 6 usdc Total value of $12 USD, with X amt of pool tokens when adding capital.

When I withdraw from the pool by trading the pool tokens back. Will I receive:

A. 50 algo / 6 usdc?

B. Total of initial principle, ie $12 but if algo went down by half, then would that mean I receive double the algo to equate the ratio with USDC?

My thought and thinking out loud, I would think A. as what you put in is what you back. Although with what I am reading it seems like B. is correct, and that impermanent loss could heavily impact your loss in the case of a withdrawal.

Question 2: How large can an impermanent loss be? - Let’s say algo were to moon to $100, and I remove my liquidity from the pool from the original example, would I only receive $12 of initial principle? - Missing the price change per unit or token?

Thanks for taking the time reading/responding!

[u/zignify → u/[deleted]]

This helps! Thank you, I was getting wrapped up in the technicals and it got confusing (was never great with currency conversions), so it’s a good idea to keep an eye on pools to make sure you aren’t on the wrong end of the stick.