Maple Finance – DeFis pioneer in corporate lending

What is Maple Finance?

concept

First of all, you need to understand that there are 2 popular types of loan: unsecured loan (unsecured loan) and Mortgage loan (secured loan).

An unsecured loan is a loan that you take out because of your reputation or the organization you run. For example, if you go to a bank to borrow money based on personal, professional, and salary information, the loan is unsecured.

Meanwhile, a mortgage is a loan where you borrow money against collateral. For example: a loan to buy a car and the car is also a security … Mortgage loans are divided into 2 types: over-collateralised (borrow an amount less than the collateral value) and undercollateralised (borrow more money than collateral).

In terms of security for the lender, the order can therefore be classified as follows:

Unsecured loan

Learn more about DeFi’s lending business: Flash Loan – The Double Edged Sword of the DeFi Market?

Define

After defining the project: Maple Finance is a decentralized marketplace for corporate loans, the aim of which is to provide borrowers with transparent and efficient financing that is concluded on-chain.

According to the author’s definition: Maple Finance is a protocol that enables companies to borrow money under collateral.

The purpose of Maple Finance is to provide undercollateralised credit to businesses in a decentralized manner. Their idea stems from the fact that organizations and mutual funds (like Alameda Research, Coinbase, Multicoin Capital …) need capital to participate in project investments (since projects often have a payment plan. Take tokens.) For a long time and only pay a fraction so that a quick repayment with funds is not possible). For this reason, Maple Finance will establish a protocol that will allow funds to borrow funds under collateral from pools of liquidity (user provided).

Members attending Maple. take part

Liquidity Providers (LPs): As those who provide liquidity or have a rough understanding of it bring capital to the pool. These men pool money to make loans and receive interest when the loan is paid off.

Pool delegates: As a representative of Pool. These people will rate the above organizations and funds, review the loan terms, and decide whether or not to approve the loan.

Institutional Borrower: It is understood that financial institutions and mutual funds need to use capital and are able to borrow (undercollateralise) capital under the reputation of the organization.

Staker: Who insures the pool. Each pool is insured, so to speak, by locking a certain amount of assets in the pool staking. If the loan defaults, there is a risk of liquidation, the part of the assets in this staking pool will be liquidated first after the collateral has been completely liquidated. In return, these stakers receive% interest at the end of the loan.

Operational flow

first. First, Maple Governance approves the pool delegate.

2. Once approved, the pool delegate creates a strategy, posts it to the pool, and activates the pool by staking a minimum amount of MPL and USDC. At this point, many pools are created on Maple, with each pool having a different credit strategy and interest rate. For example, Pool A only awards to mutual funds with an average return of 30% over the last 5 years; Pool B lends to mutual funds with an average return of 20% over the last 3 years …

3. The LPs themselves refer to the strategy of each pool, then select the appropriate pool and add liquidity.

4th The borrower creates a credit profile (this profile is in the form of a bank credit file, which shows the credibility of all kinds of funds) and a credit agreement (conditions for the loan amount, payment term, interest rate …).

5. This profile is examined by the pool delegate, if it is OK, the loan agreement is initiated.

6th Borrowers withdraw the loan amount from the pool and also deposit a certain amount of collateral for a transaction (stake collateral). A fee (called the formation fee) is charged for this promotion and sent to the Maple DAO Treasury.

7th Borrowers pay interest according to the promised cycle and principal when the loan is due.

8th. The pool delegate will claim the interest + principal paid by the borrower during the lending process. This amount can be claimed by LPs and stakers at any time during the loan process.

9. Until the due date, if borrowers have not paid their debts, they have an additional 5 days to make the payment. If the payment is still not made, the collateral will be liquidated by the pool delegate and returned to the liquidity pools that funded the loan. In addition, the defaulting organization will also suffer reputational damage if the record for this non-compliance is available. If the collateral is liquidated but still insufficient to pay the liquidity pools, the shortfall can be taken from the staking pool (the portion deposited by the stake).

Fees on Maple

There are 2 types of fees at Maple including:

How to make a profit with Maple

From the fee table above, there are 3 ways you can make money with Maple:

– Provide liquidity: Users can participate in providing liquidity to pools to earn a fixed rate of interest on the pool’s cash and cash equivalents. This fixed rate is determined by the terms set by the group agent and the borrower. In addition, participants who provide liquidity can earn additional MPL through liquidity mining in some selected pools.

– Coverage of the stake pool: Maple rewards users who participate in locker contracts. The assets in this locker contract are a reserve that is always at risk of being liquidated in order to protect the LPs in the event of failure. Staking participants receive 1% of the interest generated by the borrowers.

– Become a pool delegate: Become a pool delegate, represent the pool in the evaluation, approve loans and manage the pool and get fees back.

MPL token

MPL is an ERC-20 token on Ethereum of the Maple Protocol. The total supply of MPL is 10 million tokens with 3 main features: governance, staking, participation in network fees, in particular:

MPL holders can vote on changes to the protocol, including proposals for fee adjustment, minting or burning of MPL, and other proposals related to the operation of the protocol. In particular, MPL holders have the right to vote on the distribution of fees accumulated in the Maple DAO Treasury.

MPL holders also receive a portion of the fees borrowers pay for Maple Protocol. All Maple owners receive a share of the formation fees that are accumulated in the Maple DAO Treasury. Additionally, holders can receive additional ongoing fees when participating in staking.

Development speed

Currently I only see 1 liquidity pool from Orthogonal Trading on Maple with a total pool value of 37.2 million.

According to some information I’ve read, Maple’s first $ 17 million loan was taken out with borrowers Alameda Research, Wintermute and Amber Group.

Funders and Investors

From the information I find out, Maple Finance went through 2 funding rounds, the Seed Round and the Venture Round with pretty well-known names like Framework Capital, Bitscale, Alameda Research, One Block Capital, Polychain …

comment

The current main operating model of Maple can be seen revolve around lending under mortgages. All profits protocol makes include formation fees and ongoing fees. So that the project can develop, requires more participating institutions to borrow money at Maple, increasing fees charged and providing greater benefits to Delegates, LPs, Stakers and Owners. Only when this condition occurs will the demand to buy and hold MPL tokens increase and the price of the token may increase.

Currently I see that the demand for credit is not high, the number of participating pools on Maple only has 1 pool. Therefore, in order to confirm whether the market really needs such a product in the near future, it is necessary to continue monitoring. In return, a positive point is that the first pool attracted a large amount of deposits (USDC 20.2 million) which shows that a lot of people are still interested in how to make money on Maple.

The mechanism of action of Maple is actually quite similar to a “specialty bank”. Users will deposit money, Maple brings this money to lending through its protocol (delegates are bank appraisers, approve loans), the interest is split among the parties. The Maple Mechanism has minimized the risks to the users by transferring the risk to another pool staking, in return the stakers get more rewards. Currently, however, credit approval is still highly dependent on delegates (filtered by MPL holder through governance). Therefore, in my opinion, the decentralization in this protocol is still relatively limited.

However, I am a little Disagreement over the delegate reward mechanism. Delegates are credit assessors, so if delegates are rewarded for initial assessment and approval of the valve package (charter fees) it doesn’t make sense as delegates can be greedy to approve many credits even if they are not qualified. It is like a man who has small investor mutual funds but receives fees on investment projects. To be more reasonable, I believe the delegates will receive formation fees when the loan is paid off.

From the above analysis, I feel The purchasing power for MPL tokens is not yet great, in particular, holding and staking MPL has not produced enough attractive profits. Personally, I will put Maple Finance on the watchlist and monitor the future development of the project.

Poseidon

Check out more articles analyzing other potential DeFi projects by the Poseidon author: