Maple Finance is looking to shake up the digital financial sector and global lending as a whole as we discuss it with our members in our community in Telegram. The protocol enables lending and borrowing differently from regular DeFi projects. At the heart of the process is the concept of undercollaterization. Through it, the team says, vetted institutional borrowers can access funds more efficiently, and lenders can guarantee a decent yield for their efforts.
How is Maple Finance planning to achieve this goal? Is their native token, MPL, an attractive prospect for crypto investors? And what about the financial system that Maple’s team believes needs fixing? In this extensive guide, we will answer all these questions.
In this guide:
- What is Maple Finance?
- How does Maple Finance work?
- Features that make Maple Finance unique
- Benefits of Maple Finance
- How to use Maple Finance?
- What is Maple (MPL)?
- Will Maple revolutionize the global financial system?
- Frequently asked questions
What is Maple Finance?
Can traditional lending systems and even DeFi be disrupted and changed for the better? Maple Finance believes that the answer is yes. This is the reason why the project has set about trying to improve digital through uncollateralized lending. These loans go towards institutional borrowers. The process also provides new opportunities to lenders. They can use these features to obtain sustainable yields on their digital assets.
But, why would the DeFi space require any changes at all? While it is true that protocols such as Aave and Compound have achieved success, they’ve also received their share of criticism. On the one hand, these projects have laid the groundwork for a new, decentralized type of finance.
However, in their bid to ensure the solvency of the projects, they have also pushed for overcollaterization. This is the situation in which the value of the collateral is larger than the loan value itself. Maple Finance argues that while this reduces the risk of the loan, it stops economic actors from accessing the funds that would help them develop their ideas.
To avoid the aforementioned risk, Maple Finance’s developers say that the borrowers are highly vetted. In other words, the loans are based on factors related to trust and reputation. They argue that this is helpful for the digital financial ecosystem. Among its benefits is the fact that lenders can also depend on stable yields. Furthermore, the lenders also receive the platform’s native token, MPL, on top of the interest that they accrue. In this way, the team behind Maple argues that they allow borrowers to access the capital market, all while eliminating third parties.
How does Maple Finance work?
First of all, Maple Finance, like other digital finance projects, requires and benefits from the involvement of the general public. However, unlike traditional decentralized finance (DeFi) systems, its lending and borrowing focus on institutional lenders and corporate borrowers.
The main economic actors in this system are the institutional borrowers, the lenders, the pool delegates, and the stakers. Let’s look at each of their roles.
The institutional borrowers receive their vetting from the platform itself. They include hedge funds, market makers, or crypto exchanges. They take advantage of the aggregated financial resources with all of the financial activity recorded on chain. Maple Finance functions on the Ethereum and Solana blockchains. In exchange for the loans, the borrowers will pay an “establishment fee.” This goes towards the pool delegates and the project’s DAO, which controls the treasury funds.
The pool delegates are responsible for checking up on the borrowers’ reputation and potential to pay back their loans. The delegates themselves get picked by the Maple Finance team. The information acquired by the delegates directly influences the conditions of each loan. The funds from the loans arrive from designated liquidity pools.
Lenders get the opportunity to receive a fixed yield when providing the funds administered by pool delegates. Each lender will deposit funds into a specific liquidity pool. Besides the interest rate, they may also receive MPL crypto incentives.
Finally, the stakers provide so-called “loss capital.” Essentially, they stake Balancer Pool Tokens (BPT) tokens in order to cover losses in the event of a default. Stakers take upon themselves much of the loan risk. For their effort, they receive rewards distributed to them from the loan’s yield, as well as MPL staking rewards.
Features that make Maple Finance unique
Maple Finance’s objective of revitalizing and even revolutionizing digital finance is a tall order. In order for this to work, several moving parts must work properly. Everything starts with the pool delegates’ mission. They are responsible for the functioning of the lending protocol. This is why they undergo a difficult selection period, Maple’s developers claim. Once whitelisted, the delegates must provide a stake cover of at least $100,000.
Furthermore, the lenders and the borrowers must also review the delegate’s profile and sign off on it. They can also add additional liquidity cover when needed.
Similarly, borrowers must be verified beforehand by Maple Finance upon signing up to the platform. Pool delegates verify their information. Furthermore, they are subject to a strict underwriting process. This determines their solvency. Once approved, the loan requests sent out by the borrowers appear on chain and are visible to the borrowers.
To eliminate some issues related to cost and time, the protocol embraces the use of smart contracts. This means that it’s simple for credit experts to build businesses using the protocol and for well-respected borrowers to access funds without much hassle.
The protocol’s incentive system utilizes the platform’s native token, MPL. The token is essential for on-chain operations, as well as for its use in the governance process. It also helps ensure the lending pools through the process of staking.
The Maple Finance is a multi-chain project that runs on the Ethereum and Solana networks. It has received a good deal of attention since its release in May 2021. According to official data, over $1 billion in loans were secured over the first ten-month period of the project.
Benefits of Maple Finance
Maple Finance’s developers believe that the original DeFi projects have paved the way for a new way to use global financial tools. However, they also think that the process could be smoother. Their goal is to make lending and borrowing easier, especially for institutional actors.
The rise of the crypto space has meant that more and more institutional actors are looking for funding. Maple Finance argues that the industry’s current shape cuts many of these from financing that could be highly beneficial for the entire crypto ecosystem. The process of overcollaterization, endorsed by Aave or Compound, means that credit conditions are not extended to borrowers except under strict conditions.
Maple says that its objective is to create a $100B company. This would make it the largest crypto capital network. So far, so good. This year, Maple reported its first profit during Q1. In order to maintain its goals, the company announced in April 2022 that it would also launch on the Solana network. The Solana blockchain has a number of advantages over competitors such as Ethereum at the moment, including lower fees and wait time. It is a network that ensures Maple and other projects on it can scale up their activities.
Besides all of this, there is still great potential for growth. The Institute of International Finance recently published a report claiming that global debt had reached a value of over $300 trillion. The majority of this comes from undercollateralized loans. However, the vast majority of blockchain loans endorse overcollaterization. Maple believes that this spells a tremendous opportunity for them to become one of the leading lending platforms in crypto. Furthermore, their view is that these types of loans will become usable across the financial industry for real estate, insurance, credit cards, etc.
How to use Maple Finance?
As mentioned earlier, there are many ways to take part in the Maple Finance ecosystem. There is an excellent amount of interconnectivity between the roles of the various actors using the protocol. This means that whether you are lending funds or simply staking, the evolution of Maple can be profitable for you.
If you are looking to become a lender, Maple Finance will provide you with a stable yield from carefully vetted borrowers. If you are a lender, you need to deposit funds into a pool. In exchange, you will earn interest based on the pool’s liquidity asset. The pool delegate will determine the conditions of the loan and the value of the yield. Additionally, as a lender, you can earn MPL from liquidity mining.
You may also opt to provide pool cover. This helps the entire protocol create a financial buffer and mitigate loan risks. In the event of a default, the pool cover upsets the losses. Those who choose this option earn MPL rewards.
Users can also stake MPL. The process involves depositing directly into the platform through the MPL-compatible wallets. Maple plans to use 50% of protocol revenue to purchase MPL back from the market. The distribution of this crypto amount to stakers acts as a reward for their efforts.
Crypto-enthusiasts may also apply to become Pool Delegates. They are chosen based on their competence and reputation. For their efforts, they receive two types of rewards:
- They get a portion of the interest accrued from borrowers.
- Part of the establishment fee or each loan is distributed to them.
Last, but perhaps, most importantly, borrowers can take out on-chain loans using the protocol. Prior to accessing the funds, their capacity to pay back the loan is carefully evaluated.
What is Maple (MPL)?
MPL is the native token of Maple Finance. It is an ERC-20 token, but inherits ERC-2222 token standards when it comes to profit distribution. It plays a fundamental role in regular operations regarding loans and staking. The governance process also makes use of MPL.
How is MPL distributed?
MPL has a finite amount of 10,000,000 tokens. Out of this, the distribution of 500,000 involved a Balancer liquidity Bootstrapping tool that lasted 72 hours.
One of the most significant portions of the existing MPL, 26%, is in the ownership of Seed Investors. Next, The Maple Treasury accounts for 14% of the total supply. The sale at public auction makes up 5%. Finally, the Liquidity Mining process accounts for 30%, while the developers and other advisers control 25% of MPL.
How to buy MPL tokens
Maple’s native token is available to trade on a number of important exchanges, most significantly Coinbase. Users may also find it on Gemini, Bitstamp, and the decentralized exchange (DEX) Uniswap.
It is worth mentioning Maple’s intention of launching xMPL. This allows protocol users to stake MPL in exchange for xMPL. They will also receive part of the revenue generated from the protocol together with other utilities.
Maple says that it expects staking rewards for MPL to provide an APY of around 5% to 10%. Furthermore, the team plans to issue a quantity of 30,000 MPL to early stakers. And the protocol will use up to 50% of monthly protocol revenue to purchase back MPL from the open market.
Will Maple revolutionize the global financial system?
Maple Finance sees a problem in the general desire for overcollaterization. It believes that this leaves important economic actors unable to benefit from funds. Instead, it focuses on Pool Delegates to mitigate loans, and this undercollaterization ideally speeds up loans, gets funds to the right people, and provides lenders with a hefty yield.
If all of these pieces are in place, Maple believes that they can be used across the board when it comes to the board in the financial sector, from real estate to the credit card industry. The appetite for undercollateralized loans from institutional borrowers has proven significant, leading to Maple registering its first profitable quarter. Is there more to follow? And, can regular crypto users profit from staking MPL? Time will tell.
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Frequently asked questions
What is Maple Finance?
Maple Finance is a platform aiming to create a decentralized credit market. This crypto-capital network ensures that borrowers can access funds through undercollaterization.
How does Maple Finance make money?
Maple Finance’s revenue comes from the loan establishment fees that are paid by borrowers. These have an annual value of 0.99%. Of this, two-thirds are distributed to the Maple Treasury, and the rest is paid to Pool Delegates.
Is Maple a good investment?
So far, Maple Finance has enabled loans of over $1.2 billion, and it registered its first profitable quarter in 2022. These are positive signs, but there are no guarantees that it will be successful in the long run. It is worth keeping an eye on, at the very least.
Where can I buy Maple crypto?
MPL, Maple Finance’s native token, is available for trade on Coinbase Exchange, as well as Uniswap, Gemini, or Huobi Global.
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