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Maple Money: Mastering Forex And Crypto In Montreal – Maple is a leading DeFi undercollateralized lending platform. Accredited financial institutions (“delegates”) use Maple’s infrastructure to fund borrowers’ capital (primarily USDC) and deploy it to on-chain borrowers.
Since launch, more than $1.5B in loans have originated on Maple, which charges a 66 bps fee (annualized) on that volume. QoQ had a stellar start at >70% in Q1 ’22, but has shown signs of fading in Q2, due to broader crypto turmoil and recent liquidity challenges.
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Bell says —> DeFi and DeFi lending are here to stay, and will grow significantly in the long term. Collateralized lending will be an increasingly important part of DFI, as it frees up borrower funds for growth initiatives and working capital. Maple is currently a leader in this segment, and has done very well to date (significant growth, partnerships with large and mostly reputable institutions, and no defaults to date). It has the opportunity to continue building a trusted brand, backed by strong and well-known partners. It can continue to build a long-term moat by addressing new customer segments such as miners, offering additional lending products, and value-add technology tools for all stakeholders (workflow, underwriting, risk management, etc.). .
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Bear says —> Maple connects non-KYC/AML lenders (including retail) with borrowers who invest in risky assets without collateral. What could go wrong? Maple faces systemic risks and downside reflexes in crypto, which may lead to (a) washout by market makers/asset managers resulting in defaults or demand by borrowers; (b) general FUD leads to a reduction in the supply of credit (we are) currently beginning to see, and it is not clear how losses will be allocated among borrowers; or (c) a USDC de-peg or bank run, which we see as highly unlikely. Current climate aside, Maple’s borrower base is also fairly concentrated (25% Alameda), and borrower due diligence by delegates is ambiguous. Additionally, there may be long-term pressure on volume and fees driven by competition (ClearPool, TrueFi, etc.). Token rewards used to incentivize usage are potentially unsustainable. Finally, it goes without saying that there are significant legal and regulatory risks.
MPL is the base token of the protocol, and can be used for staking (in xMPL), providing pool cover (akin to junior debt) and governance. Maple currently uses 50% of the protocol’s revenue to buy back and distribute MPL to stickers, although this is likely to decrease over time.
There are many ways for market participants to play Maple: holding, trading, or part of an MPL, lending capital to produce, providing cover to obtain even higher yields, or pursuing a combination of the above. .
We acknowledge that we are publishing this article during a time of great uncertainty in the crypto markets (see June 2022 Updates section below). Many of the numbers below are subject to change, and we’ve tried to avoid making specific predictions about Maple’s future. Rather, we have attempted to provide a framework for thinking through its growth prospects, key risk factors, and value capture potential. We hope this is useful for anyone interested in Maple, DeFi lending, DeFi investing, or protocol / token economy design.
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Maple Finance has built a platform that allows pre-approved financial sponsors or “delegates” (such as Orthogonal Trading, Maven 11… and to a lesser degree Celsius) to build a managed lending business. Maple itself does not borrow or borrow. It develops technology in which agents can obtain capital from lenders and provide funds to borrowers. In this sense, Maple’s business model is somewhat similar to Shopify or Wix, where third parties are provided the rails to build their own two-way business.
Maple is currently operating on Ethereum (~$1.5B launch), and recently launched on Solana (~$100M launch). See below for key stakeholders and an overview of how capital flows through Maple.
For simplicity, when breaking down the lending pool data in this exercise, we’ll focus on Maple’s Ethereum segment given its relative size.
Lenders – Lenders earn an interest rate on the capital they provided to the pool. This interest rate ranges from about 4% to 10% APY. Maple does not currently offer loan-level interest payment schedules (ie, what has been paid, when is the next payment due, current loan amount, etc.), but borrowers can find out Allows how much interest they have accumulated. History
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Where Interest Flows – While it depends on the pool (Orthogonal’s Alameda Pool has a different fee schedule), interest typically flows like this:
Cover Providers – Cover providers typically earn a fixed 10% interest, although it depends on the pool (5% in the case of Alameda’s pool). The APY earned by cover providers is usually higher than what the borrower earns. This risk premium is priced in by the market, though, so core APYs can swing up or down depending on the size of the core pool (fixed interest is spread over a larger or smaller principal).
These are the revenue streams earned by Maple itself, while other revenues are passed on to delegates, lenders and cover providers.
From an investor’s point of view, we would not place much value on this revenue stream, because (a) it is unclear how this stream will scale with the growth of Maple’s core business (while establishment fees are easily offset by can be modeled), and (b) the recent turmoil in crypto markets in particular, we do not underwrite yield farming or liquidity mining as a reliable source of return.
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It is not clear whether these finances are accrual or cash based (we will assume cash). As Maple/DeFi matures, more disclosure and consistency will be required.
These finances do not reflect that the Treasury has begun to spend 50% of revenue on MPL buybacks (see below). – It is not clear how, if at all, treasury profits relate to the value accruing to Maple token holders, creditors, or creditors (Maple has enough capital to continue operations).
TL/DR: The protocol itself earns most of its revenue through a one-time origination fee, while lenders and cover providers get the yield. Poll delegates benefit from both.
Trading Behavior – MPL currently trades at ~$14 (as of 23/6/22), roughly at its level since EOY 2021, but significantly below its early April 2022 peak of >$60. Quarter to date, MPL has fallen slightly. ETH (down 74% vs. 67% for ETH).
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Clearly, we do not want to be in the business of providing investment advice. Rather, we want to equip people with the tools to make the best decision for themselves. APYs are likely to move in the coming weeks, with lenders and borrowers adjusting their risk aperture in light of the volatility within crypto. We’ve already seen some of the DAO’s treasures fall out of the Maple lending pools and many other lenders request withdrawals. We will continue to monitor this trend.
RisksCredit & Underwriting – Maple has a significant degree of non-standard risk for stakeholders, particularly lenders and cover providers.
Broader Macro/Systematic Risk in Crypto – DeFi grew dramatically in a very short time (over $250B+ of TVL at its peak), and still sits at ~$70B in TVL. There is a web of interconnectedness between funds, DeFi protocols, and other stakeholders, which has already shown clear signs of a downward reflex given all the cross-collateralization and leverage in the system. While one could argue that the ecosystem has been resilient all things considered, it’s certainly been an incredibly tumultuous streak that has resulted in multiple setbacks and crashes to the $1T+ market cap in crypto. has happened Maple can be exposed by:
Moreover, Maple has never experienced the volume of withdrawals as it is now. In the event of a massive default, it is not clear how the losses of borrowers in the pool will be absorbed. If some are able to withdraw earlier than others, do they recoup 100% of their principle, while those who hold off later absorb all the losses?
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Competition and Fees – Today Maple’s delegate base is highly concentrated (total of 5 delegates on Ethereum, with >$1B in origination). If any of these delegates leave for other collateralized platforms such as Clearpool or TruFi for any number of reasons, lenders and borrowers may follow suit. Moreover, it is possible that competition will put downward pressure on fees (the final fee could drop by 66 bps, and token rewards could be put under pressure). Maple will likely seek to develop additional products and token incentives to offset competitive pressure. Legal and Regulatory Risk – We have more questions than answers on this front, but the belief that high-volume institutions borrowing money from non-KYC/AML customers (including retail) could be problematic in the eyes of regulators, Especially if there is significant impairment or tax avoidance and collection issues. Additionally, since defaults have not yet occurred, it is unclear what recourse Maple will have (based on interviews with management, it appears that each on-chain loan has legal agreements backing it, which are enforced in Cayman but are enforceable in NYC). Product Sustainability and the Role of MPL – As mentioned above, MPL awards have several implications:
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