The Race to Build a "Sticky" DeFi Debt Market

APR 04, 2022 • 13 Min Read

THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY, AND YOU SHOULD NOT MAKE DECISIONS BASED SOLELY ON IT. THIS IS NOT INVESTMENT ADVICE.

Key Takeaways

  • Maple Finance looks to tackle under-collateralized lending within crypto. Its growth has been impressive, funding over $580M in loans during Q1 2022 and aiming to achieve $5B in originations by the end of the year. It’s native token, MPL, has also performed extremely well, up nearly 200% since the start of the year.

  • Maple facilitates undercollateralized loans via its pool delegate model. These delegates are reputable trading firms such as Alameda, Maven 11, and Orthogonal Trading that manage lending pools. Delegates onboard trusted borrowers and negotiate loan terms. From here, lenders can then deposit into lending pools of their choice to earn yield and MPL token rewards.

  • Borrowers are currently paying ~9% for USDC loans on Maple versus 3% on Aave. Although these rates are more expensive, they are stable and don’t require any capital down. This makes loans on Maple attractive for businesses that need cash to grow. Lenders can earn nearly 7% by depositing to USDC pools (+6-10% in MPL tokens) which is significantly better than Aave supply rates at 2%. These rates are sustainable and much higher than Aave but do come with added risks of potential default by borrowers.

  • xMPL holders directly benefit from the duration and amount of loans funded on the platform. Maple is targeting $5B in originations by the end of the year which would send ~$8.4M in earnings to xMPL holders. This represents a ~25X P/E on MPL circulating supply, and is quite reasonable considering the speed of its growth and potential to scale with the delegate model.

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