Additional Considerations for LPs

Beyond the core risks outlined previously, LPs should be aware of several additional considerations:

Protocol Incentives and Future Value

FIVA implements a comprehensive incentive structure for liquidity providers that extends beyond trading fees. These incentives create additional value opportunities but also introduce their own considerations:

• FIVA Token Exposure: Liquidity providers gain exposure to the FIVA ecosystem through potential future token airdrops. While these incentives can enhance overall returns, they also introduce exposure to FIVA token value fluctuations and distribution timelines.

• Governance Participation: Long-term liquidity providers may gain the opportunity to participate in protocol governance, allowing them to influence future protocol development. This represents both an opportunity and a responsibility that requires active engagement with the ecosystem.

• Early Participant Advantage: Historical data from similar protocols suggests that early liquidity providers often receive proportionally higher incentives, creating a time-sensitive element to the risk-reward calculation.

When evaluating liquidity provision as a strategy, these incentive structures should be considered alongside the core risks (impermanent loss and market risk). They represent potential upside that might offset these risks, but should not be viewed as guaranteed returns.

Opportunity Cost Considerations

When providing liquidity, your assets are committed to the pool and cannot be used elsewhere. This creates opportunity costs that should be weighed against expected returns:

• The underlying yield-bearing assets could be deployed in other strategies

• The capital could be used for different investment opportunities

• PTs could be held until maturity for guaranteed returns without IL risk

These opportunity costs become part of the holistic risk assessment for potential liquidity providers.