> For the complete documentation index, see [llms.txt](https://brownfi.gitbook.io/brownfi-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://brownfi.gitbook.io/brownfi-docs/brownfi-v3/benchmark/using-univ2-as-the-benchmark.md).

# Using UniV2 as the Benchmark

Divergence loss (also known as Impermanent Loss or IL) is the gap between an LP position's value and simply holding the same assets in a wallet. It is entirely natural: the moment you deposit into a pool, traders' swaps continuously rebalance your position away from the original holdings. There is no AMM design that escapes this; the portfolio diverges from buy-and-hold by construction. The goal, therefore, is not to eliminate divergence loss but to limit it as much as possible while earning enough in fees and premiums to compensate.

This is why UniV2 is the right benchmark. IL is an unavoidable cost of any rebalancing strategy, including UniV2. The relevant question is not whether BrownFi eliminates IL, but whether it does better than UniV2 on the same rebalancing foundation. UniV2 is the honest baseline: same logic, no extras. Any performance gap above it is purely attributable to what BrownFi adds, oracle pricing (which eliminates LVR, the arbitrageur drag that causes UniV2 to underperform its own constant-mix baseline), Kappa concentration (higher fee income per dollar), and dynamic spread (extra LP revenue during volatility).

On a performance chart, the expectation is that the BrownFi LP line sits above the UniV2 line, with the gap widening over time. That divergence is the direct measure of lower IL and higher yield working together.

<table><thead><tr><th width="139.046875">Strategy</th><th width="103.96875">IL</th><th width="102.8125">Yield</th><th>Long-run outcome</th></tr></thead><tbody><tr><td>Buy-and-hold</td><td>None</td><td>None</td><td>Baseline - no compounding</td></tr><tr><td>UniV2 (Constant-mix)</td><td>Moderate (LVR drag)</td><td>Low (full-range)</td><td>Underperforms buy-and-hold short-term; closes gap and outperforms slowly via fees</td></tr><tr><td>BrownFi V3</td><td>Low (LVR eliminated</td><td>High (Kappa + Spread)</td><td>Outperforms UniV2; surpasses buy-and-hold over time.</td></tr></tbody></table>