I. Introduction

As Hermes/Maia V2 approaches, we anticipate a substantial surge in our DAPPs usage, likely resulting in a significant uptick in demand and subsequent price escalation. With the current market cap for Maia and Hermes at 2.6 million and 2.3 million respectively, the prospect of multiple price increases may seem more likely, especially with the imminent launch of V2.

While this scenario is favorable for token holders, it poses challenges for those providing liquidity (LPing) for these assets. The substantial impermanent loss (IL) incurred may outweigh potential fee gains, making it less attractive for liquidity providers.

In light of this, we propose that Maia Dao takes proactive measures by strategically withdrawing our Maia/WETH liquidity from UniMaia, mitigating potential risks associated with liquidity provision in the face of market dynamics.

II. Background and Rationale

Maia DAO currently has significant liquidity in the WETH/MAIA pool, as shown in the following screenshot below:

Source: https://debank.com/profile/0x77314eaa8d99c2ad55f3ca6df4300cfc50bdbc7f

With a tenfold surge in Maia prices and an ETH increase to $2500, the resulting impermanent loss (IL) would be a significant 47.28%. This represents a substantial loss that can be entirely avoided by proactively withdrawing our liquidity. Waiting for Hermes V2 provides an opportunity to reassess our strategy for Maia.

Engaging in liquidity provision in this scenario would seem counterintuitive, as it essentially hedges against one of the most significant events for Maia/Hermes in the past two years. Considering the array of alternative active hedging options available, it would be prudent to reconsider LPing in this particular instance.

Source: https://poolfish.xyz/calculators/uniswap?uniswap.fish=1 (Previously uniswap.fish)

III. Impact of the proposal

This section presents a comprehensive analysis of the MAIA/WETH LP, including initial positions, pricing, and range data. By examining these initial values, we evaluate our position's performance over the past six months and develop predictions to effectively manage potential risks.

The TVL of UniMaia is anticipated to experience a reduction of approximately 25%, primarily attributed to the withdrawal of liquidity. While the Maia portion contributes a relatively modest volume, the withdrawal of ETH could have a detrimental impact on overall protocol volume and subsequently affect fee earnings for UniMaia.

Source: https://defillama.com/yields/pool/25022ece-b08a-48be-831c-636588baf5aa

With the current APR hovering around 11.7%, the pool earnings struggle to significantly impact the impermanent loss (IL) when compared to potential scenarios with an x10 increase in Maia's price. The examples below illustrate the implications of scenarios in which $MAIA experiences a price appreciation of 3x and 5x, respectively.

Source: https://poolfish.xyz/calculators/uniswap?uniswap.fish=1 (Previously uniswap.fish)

Even with a modest 3x scenario, it becomes evident that achieving profitability would take over a year compared to the straightforward strategy of holding $MAIA in our treasury. This calculation doesn't even account for utilizing Maia in Hermes V2 to enhance returns and receive incentives, further reinforcing the argument for considering the relocation of our liquidity from the pool.

IV. Proposal Details

Justification

Despite the potential impact on earnings for the protocol, this concern does not serve as a complete deterrent for the proposed action. The collective earnings from the entire protocol currently do not justify the considerable risk of impermanent loss (IL) we face with the impending launch of V2, as seen in the multiple examples above.

Limitation

While drafting this proposal, we thoroughly analyzed the “Impermanent Loss Calculator” provided by Poolfish (previously uniswap.fish) and recognized its value in visualizing potential outcomes in liquidity pools. However, we must also acknowledge its inherent limitations.

• Primarily, the tool's LP Yield (60d) relies on historical data, extrapolating it over the next year to estimate future yield. This approach inherently biases the calculator towards past market behaviors, potentially misleading users in rapidly evolving market conditions.
  • i.e., in scenarios of sudden market volatility, historical data may not accurately predict future yields, leading to miscalculated investment decisions.
• To enhance our understanding and mitigate these limitations, we propose supplementing the calculator's output with real-time market analysis. This approach would provide a more holistic view, taking into account the latest market trends and shifts in blockchain protocols, factors that significantly impact liquidity and yield outcomes.

Despite these limitations, the “Impermanent Loss Calculator” remains a valuable starting point for liquidity pool analysis. By combining its insights with current market data and personalized risk profiles, we can achieve a more comprehensive and practical understanding of potential investment outcomes.

Final Thoughts

Nevertheless, our proposition remains as follows:

🦄 To proceed with the withdrawal of our liquidity from the Maia/wETH LP on Unimaia V3.

V. Implementation Plan

Upon successful phases of Request for Comment through Commonwealth and an approval of the proposal via Snapshot by governance, the multisig will immediately withdraw Maia/wETH LP from UniMaia.

Upon withdrawing our liquidity, the received ETH can be strategically employed in alternative staking solutions, potentially mitigating the earnings loss for the DAO. However, it's important to note that exploring such revenue streams is currently beyond the scope of this proposal and warrants separate consideration.

VI. Community Engagement

Your participation in the decision-making process is crucial. Please cast your vote during the designated time during the Snapshot voting period. The voting options are as follows.

• For: To proceed with withdrawing the DAO’s liquidity from the UniMaia Maia/WETH pool.
• Nay: To maintain the current liquidity status.
• Abstain: No opinion

VII. Next Steps & Process

• Commonwealth Forum: Temperature Check (48-72 hours)
• Snapshot Vote: Governance via sMaia holders (72 hours)

VI. Conclusion

In conclusion, this proposal presents a strategic response to the evolving dynamics of the Hermes/Maia V2 launch. It aims to balance the interests of our token holders with the practical realities faced by our liquidity providers. By proposing the withdrawal of our Maia/WETH liquidity from UniMaia, we are taking a proactive stance to safeguard our assets against the risks of significant impermanent loss, ensuring the long-term sustainability and financial health of the protocol.

This decision is not just about mitigating risks; it's about positioning ourselves advantageously in a rapidly changing market. The choices we make today will define our resilience and adaptability in the face of future challenges and opportunities. Therefore, your participation in the voting process is not just valued – it is essential. It represents your voice and your role in shaping the future of our protocol.

We encourage all members of our community to engage in this process, to review the proposal thoroughly, and to cast their votes during the designated Snapshot voting period. Together, we can steer our protocol toward a future that is not only profitable but also secure and well-aligned with our collective vision.