Nelson Mandela once said: I never lose, I either win or I learn. 2022 offered plenty of opportunities to learn. In the midst of this it can be easy to dwell on setbacks, but there were a number of wins for Maple along the way.

1. Became the largest on-chain institutional lending protocol

In the first half of the year, Maple became the largest on-chain protocol facilitating institutional lending when TVL reached a high of $965 million and loan origination volume exceeded $1.6BN - Delphi Digital, Messari shared the news via detailed, paywalled reports. The drop in TVL since then drives our diversification efforts.

2. Welcomed Icebreaker to issue credit to a new borrower set, secured 100% by Real World Assets

Icebreaker Finance joined to leverage Maple tech to issue loans secured by business-critical digital and physical assets. The team has 60 years of structured asset finance and credit experience and shares our vision to leverage blockchain technology to transform how things are done. For lenders, the pool provides a new yield opportunity and paves the way for more exciting opportunities in 2023.

3. Launched Maple 2.0 - a fundamental overhaul of the smart contract architecture

Maple 2.0 had been in development since February 2022 and required months to research, design, build, test and deploy. Part-way through the build stage, the team rescoped to incorporate customer feedback from June-July events and worked tirelessly to ship 2.0 on-time. Maple 2.0 contracts are modular and robust and will facilitate Maple scaling into the tens of billions and beyond. Maple 2.0 is evidence of our commitment to continuous improvement and being a long-standing, credible ecosystem player.

4. Tested Maple’s enforcement framework, which has proven strong

The Maple Foundation was formed solely to serve as the enforcer in the case of a default and it successfully petitioned to appoint liquidators. The enforceability of the terms of the Master Loan Agreement have not been challenged by debtors. KYC/AML processes strive to ensure protection for protocol participants. As we move to provide our bundled services to a broader range of Delegates and institutional borrowers, we will continue to review and strengthen our legal protections.

5. Built a strong, collaborative team whose work is broadly recognized

The team of of ex. bankers and technologists is small but impactful. They showed resilience in the face of great challenges and worked incredibly hard, which we’re grateful for. This year Maple won the title of best place to work by Harrington Star; was celebrated for open communications by the community and stand-out code by auditors and integration partners; and was nominated for ‘Newcomer of The Year’ by Private Debt Investor.

The turn of the year marks a new phase in the evolution of Maple. Maple’s bundled technology and commercial services will one day replace the status-quo systems in traditional finance, and our 2023 commercial strategy advances us towards this ambitious goal. 2023 can be synthesized in just one sentence, with a full break down in the second part of this article.

“Build on-chain capital markets infrastructure that provides a diversified set of lending opportunities through strong and reputable Delegates”

If you know a potential Delegate or have a new credit strategy that could be an opportunity, contact us.

Addressing common criticisms

“Maple protocol needs improvement to protect the interest of lenders”

The key criticisms of the Maple product in June and July were:

i) withdrawals needed to be fairer;

ii) borrower defaults need to be called earlier, not just after a missed interest payment;

iii) MPL attached to Pool Cover introduces wrong-way risk.

The team took these learnings, re-scoped Maple 2.0 and successfully deployed on schedule with solutions to each of these issues. Maple 2.0 provides better tooling for Delegates to manage liquidity and credit risk. Withdrawal requests can now be scheduled and pro-rated, which improves the toolset available for Delegates to manage liquidity. Delegates are able to call defaults at the first sign of borrower distress so that each impairment is shared equitably across the pool. First Loss Capital was simplified so that Lenders are not exposed to volatility from MPL.

“Maple isn’t DeFi”

CeFi’s lack of transparency and issues with commingling of funds are precisely what Maple solves by blending the best of traditional finance; legal frameworks, credit assessment and DeFi; non-custodial smart contracts and transparency. CeFi firms should be using Maple technology and infrastructure to create silos for credit risk management. For example, a CeFi Earn program could launch a pool on Maple to issue loans to approved borrowers. These loans would always be visible; collateralization ratios would be enforced; and Delegates would commit First Loss Capital.

At present, many yield apps and Earn programs are working with CeFi lenders or trading firms where:

i) equity reserves are not verified;

ii) there is zero awareness of loan collateralization or value;

iii) the CeFi lender is lending from a separate entity or commingled omnibus account (usually the latter);

iv) the separate entity uses separate wallets for each entity to ensure funds not commingled (again, usually not the case);

On Maple, funds are non-custodially held in smart contracts. One example of effectiveness is the continued operation of Maple’s smart contracts despite Orthogonal Trading’s insolvency and the decision to sever all ties with the firm. As a result, Lenders into the Orthogonal pool received back the full value of their deposit without any loss caused by Orthogonal Trading’s insolvency.

On the topic of transparency, we would wager that the vast majority of institutions and individuals who have funds deposited with a CeFi lender today have no information on i) the equity reserve, ii) their top 10 borrowers; iii) their credit impairments in 2022; iv) their liquidity; v) average level and type of collateralization; or vi) the current size of their loan books.

All of these features are shown in real time on every Maple pool, 24 hours a day. But transparency is double-edged sword. On the positive side, lenders have access to information needed to make and monitor loans. This demands transparency when there is distress, and in this spirit M11 Credit provided updates on Auros and Orthogonal, whose loans and repayments were visible on chain, generally within 48 hours of being notified of any material changes.

By providing the best of DeFi technology in partnership with traditional processes, Maple will transfer the value of the legacy industry on-chain, provide further use cases for DeFi and replace the systemic issues of CeFi that were well-documented and hard-felt during 2022.

“Uncollateralized lending to market makers doesn’t scale”

We agree. Maple found product-market fit with Delegates that issued credit to crypto market-makers, scaling to $2BN in loans originated from the protocol. Within the nascent industry of crypto there are a limited number of lending opportunities. Outside of crypto, the lending opportunities are abundant. With Maple’s infrastructure, these opportunities can be facilitated on-chain and made lower-cost, accessible and transparent. We are diversifying within crypto and into the real-world by onboarding new Delegates and their wide ranging expertise and strategies; Collateralized and uncollateralized; open-term and short term; fixed and variable.

Maple in 2023

Jeff Bezos talks about how it is better to focus on what will not change. As we survey lending, we observe that current and prospective customers want three things: more delegates and yield strategies for lending, more risk protections, and more transparency. Our three strategic focus areas for 2023 address all three customer demands and are as follows:

Diversify Lending Opportunities

Maple can be the marketplace where Lenders explore and choose from a variety of lending options that suit their risk appetite, term-preferences, and chosen industry vertical.

The space is risk-off. To maintain a focus solely on market makers would be to ignore this. More options along a spectrum of risk are required to develop Maple’s vision of debt capital markets moving on chain.

Real World Asset lending options are uncorrelated with crypto markets and achieve diversification of risk in an uncertain economic environment. Treasury, reinsurance, staking validators, trade receivables, real estate and infrastructure products represent the first beachheads that new Maple Delegates will push into.

Attract new and reputable Delegates

The catalyst to Maple’s scalability is in onboarding more Delegates to the platform to underwrite different credit strategies. Maple is a protocol that provides infrastructure to run an underwriting business and facilitate borrowing and lending. Maple will attract more Delegates by making it easy to onboard, add real value by lowering the cost of operations and by improving risk management. We will build a full-suite of loan products so any and all Delegates can launch a lending pool, unique to their strategy on Maple.

Build Cutting Edge Technology on Ethereum

Maple does not aim to be the lender itself - we wish instead to provide cutting edge technology and supporting services. The analogy we always come back to is Shopify - who provides tools to operate an ecommerce business without being the merchant themselves. Custodians, exchanges and other institutional service providers will be able to integrate directly with Maple and introduce the diversified lending opportunities of pools on Maple to their customers.

We are concentrating our efforts on Ethereum to be able to ship faster than when operating multi-chain. We’re leveraging the interoperability of ERC 4626 so that capital markets participants can easily interact with Maple pools.

Our vision when we started Maple was to modernize capital markets so that innovative companies and projects can access finance to expand, grow, and push society forwards. Finance for great businesses comes from equity or debt. With Maple, we did not want to create just another lender, but instead, to create a protocol on which all lending business could move to over time. In doing so, we hope to reshape how capital markets work—not so that the world is awash in debt, but so that the barriers preventing innovative companies from accessing it are removed. We remain as committed as ever to this vision.

We are grateful for the support of our community and stakeholders. The arrow of change is always towards easier ways of doing business, and in finance this points inexorably towards capital markets moving on chain with Maple.

Sid & Joe