Maple Finance

Maple Finance 2.0 overhaul aims to speed the process for loan defaults

The overhaul of the protocol, dubbed “Maple 2.0,” comes only weeks after the decentralized lending platform saw two major defaults on the back of FTX’s collapse.

Crypto lending platform Maple Finance has unveiled a major protocol upgrade aimed at making defaults and liquidation procedures less cumbersome in the wake of recent defaults.

Maple Finance is a decentralized credit market powered by blockchain technology. Instead of requiring loans to be overcollateralized, it instead allows managers to issue loans from its lending pools based on a set of risk-management criteria, according to the protocol’s documentation.

But in the wake of FTX’s collapse, the platform experienced two major defaults from borrowers on the platform.

On Dec. 1, algo trading and market maker Auros Global missed its payment of 2,400 Wrapped Ether (wETH) following Alameda’s demise, causing the loan to go into a five-day grace period. That grace period has since passed, and the borrower has begun to incur penalties, according to a post by lender M11Credit.

Days later on Dec. 6, crypto hedge fund Orthogonal Trading admitted to having been “severely impacted by the collapse of FTX,” prompting M11Credit to issue a notice of default on the fund’s $36 million in loans.

The new protocol overhaul, dubbed “Maple 2.0,” will upgrade its smart contracts so that defaults such as these can be more quickly handled and settled by loan managers, known as “pool delegates.”

Previously, loans could only be put into default if a borrower missed a payment and the grace period passed. This meant that collateral could not be liquidated even if the borrower admitted in advance that they couldn’t make payments.

In a blog post explaining the platform’s new features, Maple said that pool delegates will now be able to declare an early default if a borrower meets a condition of default, which will makthe loan payable immediately.

Furthermore, if a borrower doesn’t pay within the grace period, the delegate can liquidate the loan — meaning all lenders within the pool can realize the loss immediately while recovery is pursued, Mapleadded.

Related: Politicians attack crypto, demand regulation at FTX congressional hearing

The new version of Maple Finance also includes features meant to make quality-of-life changes to the lending platform.

Withdrawals can now be scheduled and prorated, and lenders can request withdrawals at any time, whereas previously they needed to wait a minimum of 30 days to withdraw after their deposit.

Pool delegates now provide “first loss capital,” meaning they are the first to suffer in the event of a default. The Maple team believes this will more closely align pool delegates’ interests with the interest of lenders.

The upgrade also introduces the automatic compounding of interest, so that interest earned is automatically reinvested into the pool and does not need to be redeposited.

Other changes include the adoption of ERC-4626 standards, allowing for more decentralized finance (DeFi) integrations and partnerships, as well as improved data and dashboards.

Crypto trading firm Auros Global misses DeFi payment due to FTX contagion

Auros is an algorithmic trading and market-making firm that provides liquidity for exchanges and token projects.

Crypto trading firm Auros Global appears to be suffering from FTX contagion after missing a principal repayment on a 2,400 Wrapped Ether (wETH) decentralized finance (DeFi) loan.

Institutional credit underwriter M11 Credit, which manages liquidity pools on Maple Finance, told its followers in a Nov. 30 Twitter thread that the Auros had missed a principal payment on the 2,400 wETH loan, which is worth in total around $3 million.

M11 Credit suggests that it is always in close communication with its borrowers, particularly after events in the last month, and said Auros is experiencing a “short-term liquidity issue as a result of the FTX insolvency.”

While Auros, an algorithmic trading and market-making firm, has not yet addressed the statement by M11 Credit, the thread has been retweeted by Maple Finance itself.

M11 Credit has also stressed that the missed payment does not mean the loan is in default. Instead, the missed payment has triggered a “5-day grace period as per the smart contracts.”

This implies that Auros has until Dec. 5 to make the late payment before it will be declared as being in default.

According to an official Maple Finance YouTube video, if a default occurs, it could result in the borrower’s collateral being liquidated and/or staked maple tokens and USD Coin (USDC) on the platform being used to cover any shortfalls to lenders. Enforcement action could also be pursued through New York courts.

M11 credit claims that it is “working with Auros to provide a joint statement that provides further information to lenders.”

Cointelegraph has reached out to both M11 Credit and Auros for comment but did not receive a reply before time of publication.

Crypto exchange FTX announced on Nov. 11 that it would file for bankruptcy after having suffered a liquidity crisis and being unable to honor withdrawals. The resulting contagion has spread to numerous other firms. BlockFi declared bankruptcy on November 28.

Galois Capital and New Huo Technology have lost millions of dollars from FTX’s collapse, and Nestcoin has had to lay off workers because of its exposure to the failed exchange.

Maple Finance CEO: Separating risk from lending saved DeFi from market crash

DeFi crypto lending has operated as intended through the crypto winter because transparency kept it in line and business activities were siloed, according to Maple Finance’s Sid Powell.

Maple Finance co-founder and CEO Sid Powell says that transparency has been the saving grace of decentralized finance (DeFi) amid the prolonged crypto market slump.

Speaking to Cointelegraph on the sidelines of the Converge22 conference in San Francisco, Powell noted that throughout the crypto winter, DeFi has continued to operate as intended while centralized finance (CeFi) has become “pretty inactive.”

Powell suggested that during the market crash, CeFi lenders hadn’t properly “battle-tested” and weren’t “prepared to liquidate clients” as they were focused on maintaining client relationships.

“As the price of Bitcoin was tumbling, they didn’t want to be sending out margin call letters or email hundreds of clients because they wanted to maintain client relationships,” Powell explained, adding:

“So, you give them a little bit longer, a little bit longer — well, suddenly a lot of these loans are underwater, particularly the ones that started on or [were] undercollateralized.”

He notes that where CeFi firms are still lending, “they’re doing so on a 1:1 collateralization” now, which is a much narrower market. 

On the other hand, “DeFi is much more transparent,” he explained. In overcollateralized DeFi models, “people just got liquidated as BTC and ETH dropped. That happened automatically.”

“In DeFi you can’t get away with letting one borrower be half of a lending pool because people see that and they question the risk management there,” Powell said. “All of the loans are visible, so you had to be much more careful of who you underwrote and how you underwrote them.”

Powell also added that CeFi businesses were diversified with trading and prime brokerage, which they thought was a strength, but all of their business lines impacted each other:

“But if a CeFi lender ran a pool on Maple, that pool would not be affected by what is happening in the trading part of that business. […] It’s restricted and siloed to just the lending activity.”

Related: Decentralized finance faces multiple barriers to mainstream adoption

Maple is a decentralized finance credit platform that claims to hold 50% of the institutional crypto lending market as measured by total loans outstanding and has issued close to $1.8 billion worth of loans since its inception in May 2021.

The Maple loan book “seriously outperformed CeFi,” Powell said, “with only one $10 million default on $1.8 billion of loans originated and 900 [loans] outstanding at the time.”

Powell described Maple Finance as “a venue for people to run lending pools,” but said there has been a reduced appetite to lend since June, causing prices for lending to go up from 8-9% to 10-13%, and thus crypto whales and yield aggregators have started to allocate again to lending platforms like Maple.

Maple Finance launches $300M lending pool for Bitcoin mining firms

The institutional lending platform has facilitated $1.8 billion worth of digital currency loans since May 2021.

On Tuesday, institutional crypto lending protocol Maple Finance and its delegate Icebreaker Finance announced that they would provide up to $300 million worth of secured debt financing to public and private Bitcoin mining firms. Qualified entities meeting treasury management and power strategies standards located throughout North America, as well as those in Australia, can apply for funding.

On the other hand, the venture seeks to deliver risk-adjusted returns in the low teen percentages (up to 13% per annum) to investors and capital allocators. The pool is only open to accredited investors who meet substantial income and/or net worth qualifications within a jurisdiction. In the United Stat, among many criteria, this means having an annual pre-tax income of over $200,000 ($300,000 with a spouse) or having a liquid net worth of more than $1 million.

As told by Maple Finance, underlying loans in the new lending pool would last for 12 to 18 months with interest rates of up to 20%. The loan would be secured by physical and intellectual assets owned by the borrower and could include Bitcoin mining rigs. Regarding the development, Sidney Powell, CEO and co-founder of Maple Finance, stated:

“Recent market headwinds have caused lenders to pull back, while traditional financing vehicles have been slower to engage this sector. Miners play an essential role in growing the crypto ecosystem and local economies, and we are proud to extend a new financing vehicle to direct capital where it is needed the most.”

Maple currently holds 50% of the institutional crypto lending market as measured by total loans outstanding. At the time of publication, liquidity pools on Maple have issued close to $1.8 billion worth of loans since its inception in May 2021.