The landscape for lending and borrowing in crypto is hyper-competitive. There are few organizations that have managed to crack the rails between larger institutions, while simultaneously linking this with permissionless retail crypto investing.
I remember hearing a podcast recently with Sid Powell and he described the protocol as mostly a business-to-business venture. Lenders need Borrowers for their capital. Along with Joe Flanagan, Sid wanted to create an ecosystem within Maple Finance to facilitate the new rails network.
Maple Finance appears to have finally found a way to link TradFi, DeFi, and CeFi with Retail.
Competitors such as BitWise, Clearpool and others are also striving to access large institutional capital. Maple Finance, however, has managed to stay strong through the current bear market and seems to have a more scalable product. Real yield generally comes from interest off of debt. Minus a single default, Maple Finance has a very scalable plan to capture a huge chunk of business-to-business lending.
To describe how Maple Finance works requires first describing the role of a Hedge Fund Manager in traditional finance. These managers are expected to have a defined investment strategy, strong capitalization, a marketing and sales plan, and a risk management strategy.
Maple Finance uses its rails to provide the marketing and sales plan, part of the risk management strategy, and leaves the investment strategy up to what they call “Pool Delegates”. Simply put, Pool Delegates are the Hedge Fund Managers of Maple Finance.
The process is very straightforward. First Pool Delegates get whitelisted. Then they complete a Pool Delegate Profile to be published alongside their Lending Pool. This profile includes their background, strategy for the Lending Pool, and the target yield. Pool Delegates are required to post $MPL (Maple Finance’s token) to their own Lending Pools to risk some skin in the game.
Pool Delegates judge RFQs (Request for Quote) from potential Borrowers. These are funneled to them by Maple Finance and the Pool Delegate may request Borrowers provide statements of current positions or NAV for confidential review. Pool Delegates can make counter-offers in regards to terms requested by the Borrowers.
Currently at the time of writing I can observe five active pools on Ethereum (ETH / USDT), and one active pool on Solana (SOL / USDT). There was a second active pool by Genesis on Solana. I believe Celsius used to be on Ethereum. After the Three Arrows Capital fiasco following the Luna collapse…well even Maple Finance couldn’t avoid some of the fallout. This was true even though Maple Finance’s treasury report shows their drawdown to be significantly less than the crypto financial averages in this current bear market.
As of writing I have seen the following:
If you want to deposit into these pools simply connect your wallet on either Ethereum, or Solana and deposit. Deposits are locked for 90 days, and there is no minimum deposit requirement as of writing. Currently you will see assets such as USDC, and wETH. Collateral can be part of the terms, but mostly these are under-collateralized loans.
Maple Finance is currently headquartered in Australia, and has thirty-five employees. They launched on Ethereum Mainnet in May 2021 , and recently Solana Mainnet in April 2022. Solana was an obvious choice to expand cross chain with their high throughput, and access to potential premium borrowers like Jump Crypto.
Maple Finance has also recently hired fifteen new team members, mostly in sales, and a few in technical positions.
Maple Finance makes money the old fashioned way: interest. It might get defined as originating fee, or performance fees, or trading fees. In the end, however, it’s interest paid to a lender for providing capital to a borrower at terms agreed upon in the Maple Finance dApp.
Revenue for the protocol is received through Loan Establishment Fees that are paid by Borrowers at 0.99% annualized. Two thirds, or 66bps, is paid to the Maple Treasury and one third, or 33bps, is paid to the Pool Delegate that originates the loan.
(Source: Maple Finance)
There are other fees, and payment details that can be found in their documentation. For the retail or institutional user the product experience is simple and straightforward. Underneath the hood, however, is a powerful system that allows retail to access institutional-grade lending and borrowing rails.
Currently there is the $MPL, and $xMPL tokens (similar to the Sushi model), but very soon there will be the $SYRUP token on Maple Solana. This was done specifically to avoid liquidity issues, and I’m sure the plethora of bridge hacks also pushed this decision. In fact. most of Maple Finance’s decisions seem to make cents? (bad pun alert).
Maple Finance has some simple yet effective staking rewards. Launched on May 30th 2022, $xMPL was available to those who staked their $MPL.
Previously users had to stake via Balancer Pool Tokens (BPLs). this was a method to both provide staking rewards, but also to increase available liquidity for the $MPL token.
Maple also uses 50% of the monthly protocol revenue to purchase $MPL from the open market and distribute to $xMPL holders. $xMPL holders with at least 25 $MPL staked can sign up to vote on MIPs (protocol proposals).
Maple Finance has recently expanded to Solana. The chasm between Ethereum and Solana, however, is vast. Maple Ethereum is currently at 1.4 billion USD, and subsequently Solana is at 115 million USD in loan originations.
On Maple Ethereum, tokens are deposited via Balancer to provide “Pool Cover” for mitigating the risk of a Borrower defaulting. The staker can either stake 50/50 $MPL & $USDC, or eat a little slippage and deposit single-sided.
Pool Cover should not be confused with “Staking”, although they are somewhat similar in their purpose.
With the new $xMPL staking model users are able to choose how much risk they wish to take in regards to impermanent loss. Balancer pools were much more risky than $xMPL staking, and now users can choose between the risk/reward of either option.
There will be competition with other lending protocols in regards to this particular hedge-fund style of Pool Delegates. That being said, it is clear that Maple Finance has the lead in onboarding TradFi institutions. This is due to Maple Finance’s novel way of separating the risk of crypto from the risk of regulatory rails.
I would ask for a flow chart to show you the relationship between these entities, but instead you will have to imagine as I describe them. (Bear market cutbacks).
Institutions can choose to either supply “Pool Delegates”, or test-fund new pools. Maple Finance will walk clients into lending pools that are compliant with said client’s risk appetite.
If the client wants USDC (permissioned) – no problem. (I can hear the screaming). If the client is ok with USDC (tainted), also no problem. Maple Finance has created a sales funnel that is scalable, and customizable enough to onboard even the waffliest version of Jamie Dimon.
In fact I would go as far to say that Maple Finance has actually listened to the screams of a thousand people on Twitter asking for UX/UI and (for the love of God) a practical business plan. Maple Finance is very scalable, and in my opinion is going to turn heads early into Q1/Q2 2023.