Introduction

Maple Finance, founded in May 2021, stands as a crypto lending protocol. Under Maple’s auspices, institutional investors can access loans without comprehensive collateral, while other users can engage for steady interest returns. According to their official website, Maple’s cumulative loan sum now exceeds $2.05 billion. As per DeFiLlama’s data, Maple’s Total Value Locked (TVL) registers at $50 million, with Solana accounting for a modest TVL of approximately $16,000; the bulk of TVL remains rooted in Ethereum. More recently, Maple has unveiled a cash management product backed by U.S. Treasury bonds and reverse repurchase agreements.

Source: Maple Finance

Background

Maple tackles the existing challenges of inefficiency in capital utilization and the risks of liquidation prevalent in the DeFi landscape. It does this by designating established institutions with credibility as eligible borrowers and implementing a system of assessment overseen by industry experts to facilitate loan disbursal. It recently introduced a lending pool invested in U.S. Treasury bonds, extending its support to non-U.S. DAOs, offshore corporations, and other entities with restricted capital deployment.

As a trailblazer in collateral-free lending, the exploration of Maple’s intricate product design, the progress of its RWA (Real-World Assets) offerings, and the underlying motivations driving its advancements merit deep consideration and reflection.

Team and Investors

The two co-founders, Joe Flanagan and Sidney Powell, bring a wealth of experience from their years in financial management consulting. As shown on their LinkedIn profiles, the Maple team comprises approximately 40 members, spread across different departments including Marketing, Capital Markets, Engineering, and Operations.

According to data from Rootdata, Maple has undergone three rounds of financing. In 2020, they successfully secured $1.3 million in seed funding, with a valuation of $5 million. In March 2021, they raised an additional $1.4 million, and in May 2021, they managed to secure a substantial $10.33 million through an Initial DEX Offering (IDO). Notably, some investors have established collaborative relationships with Maple regarding product development and partnership.

Investors in Maple Finance (Source: RootData)

All in all, this highlights a team with a wealth of experience, and some investors have also brought valuable customer resources to support Maple.

Roles and Mechanisms

Before delving into how Maple operates, it’s important to understand the key players:

• Borrowers: These are crypto-based institutions, like market makers and market-neutral funds. To become a borrower, they need to apply to Maple. Some current borrowers are AQRU Receivables, M11 Credit, and Icebreaker Finance.
• Lenders: These are users who meet Maple’s criteria and the requirements set by the borrowers. They must complete tasks like Anti-Money Laundering (AML) scans, agree to Maple’s terms, and fill out applications for approved borrowers.
• Pool Delegates: These are experienced professionals, often fund managers, familiar with credit matters. To become a pool delegate, they need to apply and be approved by the Maple team.
  • Each lending pool is managed by a single pool delegate. This delegate negotiates loan terms with borrowers, conducts financial checks, and handles collateral if a borrower defaults.
  • Delegates evaluate a borrower’s reputation, knowledge, and performance to determine loan terms. Once both parties agree on interest rates and collateral, the delegate funds the loan from their own managed pool.
  • Pool delegates bear the first loss if any occurs.

Here’s how the lending process works:

1. Borrowers set up an account and go through an approval process, communicating with the Maple team.
2. Pool delegates conduct financial checks on borrowers. Once both sides agree, the loan application is submitted on the blockchain.
3. Pool delegates provide the funds, and once everything is set, the repayment schedule begins.

For users depositing funds:

1. Make sure you have enough Gas Fees in your wallet, excluding USDC/USDT.
2. Your wallet address will be checked for money laundering concerns. Once approved, you need to agree to Maple’s terms and conditions.
3. Confirm the amount you want to invest and the duration.

In the Maple lending process, pool delegates play a big role in managing risks and being the first to bear the brunt of any loss. However, their funds might not be sufficient for quick compensation if a borrower defaults, which poses a compensation risk.

Product Overview

In December 2022, Maple launched its 2.0 version, introducing features like open-term loans. This update brought in fresh smart contracts, automating lending processes, account management, and improving user experience. Currently, Maple has provided loans exceeding $2.1 billion in total, with 19 loans active. The platform offers two kinds of loans: open-term and fixed-term.

Maple’s User Interface (Source: Maple)

Cash Management - USDC/USDT

Both of these products are managed by an entity called Room40 Capital, registered as an SP (Special Purpose) company. These products accept USDC deposits from non-U.S. accredited investors and entities. Interest compounds automatically, and users seeking withdrawals must apply at least 24 hours ahead.

These products are supported by U.S. Treasury bonds and reverse repurchase agreements. At present, user returns hover around 4.28% to 4.55%. The USDT pool, capped at $500K, employs a strategy involving a 4.95% APY reverse repo agreement. The USDC pool holds over $20 million in assets, primarily U.S. Treasury bonds. The diagram below illustrates that 0.25% of strategy returns go to Room40 (0.75% for the USDT pool), 0.25% benefits the protocol as revenue, and the remainder constitutes user income.

Maple Cash Management - USDC data (Source: Maple)

Tokenomics

MPL serves as the governance token for Maple Finance, with a total supply of 10 million. Currently, about 83.6% of MPL tokens are in circulation, and 22.6% are being staked. Holders of MPL can participate in governance decisions and earn fees. The main purpose of governance is to determine how the fees collected by the Maple Treasury are used:

1. Repurchasing MPL to hold in the treasury
2. Allocating fees to the Maple DAO to support operational activities and growth
3. Distributing fees to those who hold MPL

Source: Dune

In May 2022, Maple introduced a staking rewards program, allowing MPL holders to earn xMPL tokens by staking their MPL. xMPL is an ERC-20 token created by Maple, and it accumulates through the repurchase of MPL tokens from the open market. MPL can be unstaked from xMPL at any time. Repurchasing MPL requires using a portion of the protocol’s income. However, according to available documents and the official website, there are currently no funds from the protocol’s income available for distribution due to operational needs.

MPL Staking and Redemption Page (Source: Maple)

In summary, the usefulness of MPL is tied to Maple’s income. The recent introduction of cash management tools and new loan offerings can increase revenue and influence activities like MPL repurchasing and staking rewards.

Potential Risks

There are several potential risks associated with Maple, including:

1. Process Risks: These arise when borrowers or pool delegates make mistakes or don’t follow the proper procedures, which can lead to risks related to the product.
2. Smart Contract Risks: Maple offers contracts, but pool delegates can make changes to certain terms in these contracts.
3. Default Risks: There’s a possibility that borrowers might not be able to repay their loans or delay their repayments.
4. Asset Devaluation Risks: There’s a risk that the products you invest in might lose value or your invested capital might decrease.

In December 2022, news from The Block revealed that Orthogonal Trading, a company dealing with crypto hedge funds and credit, defaulted on loans totaling $36 million from Maple Finance. This accounted for around 30% of the active loans on Maple Finance. This incident highlights that when investing in Maple’s lending pools, it’s important to consider factors such as the financial activities of borrowers and the overall market situation.

Competitive Analysis

When looking at institutional crypto lending, we’ve chosen three products - Clearpool, TruFi, and Ribbon Lend - for comparison.

1. Clearpool: A decentralized capital market protocol that lets approved institutions borrow liquidity without needing collateral from a decentralized lending network.
2. TruFi: An uncollateralized lending protocol driven by credit scores on the blockchain, aiming to maximize capital efficiency for borrowers and yield for lenders.
3. Ribbon Finance: A crypto-structured product that helps users access DeFi. It combines options, futures, and fixed income to enhance the risk-return profiles of investment portfolios.

Data Source: RWA.xyz, RootData, TrueFi

From the data comparison, Maple has the highest total borrowed amount. However, it faces the highest default rate and the largest defaulted funds. Although this might cast a negative light on the project’s reputation, Maple’s higher returns and strong investor support continue to drive its new business initiatives forward.

During this analysis, we found that competitors are diversifying their strategies. For example, Ribbon offers a range of structured products including options and futures. Similarly, TruFi has introduced its own US Treasury Fund. The main competition now revolves around attracting more users to their unique products. Offering various products and services has become a key way for companies to stand out in the industry.

Regarding tokenized government bonds, Maple’s investment returns are slightly above average. However, in terms of scale, Maple doesn’t yet approach the 10% of industry leader Franklin Templeton, indicating room for improvement and growth. Being the quickest and easiest way to engage with RWAs, this segment is highly competitive. Maple will need to develop more innovative products, such as use cases involving stablecoin collateral, fixed-rate separation products, and on-chain collateralized loans.

Government Bond Market Size and Share Chart (Source: RWA.xyz)

Conclusion

From the upgrade to Version 2 and the launch of cash management linked to U.S. Treasury bonds and reverse repo agreements, we can observe Maple’s team striving during bearish market conditions. The market’s demand for fixed-income products is growing, encompassing activities like DAO treasury management, derivatives based on fixed-income assets, and stablecoins backed by such assets. These possibilities hold considerable potential within the industry.

Maple initially focused on institutional lending but faced challenges from industry setbacks like the UST collapse. This highlighted issues regarding repayment and risk management within Maple’s lending products, negatively impacting the brand’s reputation.

But, without a doubt, if the expansion of Maple’s product offerings generates more revenue, it will propel Maple’s staking rewards and MPL repurchasing. This creates a positive cycle of growth in both price and product. As an investor, it’s important to consider your risk tolerance before considering an investment in Maple.

How to Get MPL?

You can acquire MPL through centralized crypto exchanges like Gate.io. Firstly, you’ll need to create an account and complete the KYC verification process. After depositing funds into your account, you can purchase MPL either on the spot market or the derivative market.

Take Action

Check out the current price of MPL and choose your preferred trading pair for immediate trading.

• MPL/USDT