“impermanent loss is permanent when a prediction market resolves to zero”
Historical walkthrough of why LMSR-based automated market makers structurally failed for prediction markets. In a binary market that resolves to 0 or 1, impermanent loss becomes permanent: the pool inevitably holds worthless shares on the losing side, and trading fees cannot offset a guaranteed structural loss. The piece traces Polymarket's late-2022 migration from an LMSR AMM to a central limit order book as the moment the industry recognized that prediction market liquidity needs a different mechanism than token swaps.
Some technical background helpful
Platforms mentioned: Polymarket, Augur