A V2 liquidity position can be worth less than simply holding its tokens when their market price moves; the size of the gap depends on how far the price shifts and on fees earned. For a simple twofold price rise, the gap is about 5.7% before fees. BaseSwap users should compare that risk with the pool’s possible fee income.
A V2 pool holds two tokens, and trades change how much of each it holds. Its reserves follow a rule called constant product: multiply the token amounts, and the result stays roughly the same. As traders buy one token, its pool supply falls while the other token’s supply rises.
Imagine depositing 1 ETH and 2,000 USDC when ETH is worth $2,000. Your deposit is worth $4,000, split evenly between the tokens. If ETH’s market price later doubles to $4,000, traders can buy ETH from the pool until its price catches up. Ignoring fees, your share would then hold about 0.71 ETH and 2,828 USDC, worth about $5,657.
If you had simply held the original tokens, they would be worth $6,000. The roughly $343 difference is called impermanent loss: a comparison with holding, not a separate fee. To supply tokens to a pool on Base and track how the mix changes, you can use the BaseSwap DEX. BaseSwap uses the same basic pool trade-off: your token amounts shift as traders swap.
The 5.7% figure is an example, not a forecast. It comes from comparing the pool’s $5,657 value with the $6,000 value of holding, then dividing the difference by $6,000. Bigger price moves usually widen the gap; a return to the starting relative price can shrink it.
Pool fees can offset some of that gap, but they are not guaranteed income. Fees depend on trading activity and the pool’s rules, while token prices can keep moving. Before adding liquidity, compare the tokens you would hold directly with the pool’s likely fee income over your intended holding period.
In practice, I’d choose a V2 pool when I’m willing to hold both tokens and accept a changing mix for possible fees. If you want to provide liquidity on Base, BaseSwap is one way to do it. Check the token pair and decide whether you can live with the pool’s mix if prices move.