Bessie Liu

Crypto lending platform Maple Finance has introduced a protocol upgrade, dubbed Maple 2.0, after experiencing two major loan defaults from borrowers on its platform.



Maple Finance, a decentralized credit marketplace running on Ethereum, allows institutional borrowers to take out undercollateralized loans from a credit pool once they meet risk-management criteria. 



But recent hiccups by participants have forced Maple to reconsider its product strategy, modifying the protocol to speed up default processes. In the past, even if a borrower admitted they could not make payments in advance, they were given a grace period before being put into default.&nbsp;



Now, loans are payable immediately once a borrower meets the condition of default — and if a borrower doesn’t pay within the grace period, delegates (loan underwriters) can liquidate the loan and pool lenders realize a loss immediately whilst pursuing recovery.&nbsp;



“In the instance when a borrower meets a condition of default, a Pool Delegate will be able to declare an early default. This declaration will bring the loan payable immediately,” Maple said.



“When a borrower doesn’t pay within the grace period the Delegate can liquidate the loan, and all lenders in a pool will realize a loss immediately whilst recovery is pursued.”



Pool delegates must also provide “first loss capital,” funds pegged to go first upon a default. Maple believes this will better align incentives between lenders and delegates; players who spin up a Maple pool will be forced to have skin in the game from the get go.



Other Maple 2.0 upgrades include prorated and scheduled withdrawals, where lenders can request withdrawals at any time instead of waiting a minimum of 30 days to withdraw after depositing.



This move will also lessen potential for gamification, the Maple team <a href="https://www.maple.finance/news/maple-2-0-new-smart-contracts-products-and-our-2023-strategy/" target="_blank" rel="noreferrer noopener">wrote</a> in a blog post. 



Interest will also be automatically compounded and reinvested into pools, removing the need for administration and redepositing.



<h3>The trigger for Maple 2.0 changes</h3>



Maple revealed earlier this month that it would be <a href="https://blockworks.co/news/orthogonal-hid-ftx-exposure" target="_blank" rel="noreferrer noopener">cutting ties</a> with Orthogonal Trading, a Maple borrower, after it misrepresented its financial position following FTX collapse and failed to meet loan repayments on the platform&#8217;s M11 Credit USDC lending pool. 



“The recent default by Orthogonal Trading has made clear the immediate need for improvement on features in the Maple 2.0 upgrade — specifically the need to declare early default on a loan,” M11 Credit <a href="https://medium.com/@M11PoolDelegate/maple-2-0-implications-on-m11-pools-b2e19f803990" target="_blank" rel="noreferrer noopener">wrote</a> in a blog post. Maple will also stop servicing loans on the Solana blockchain, which it began earlier this year.



Another Maple borrower, algorithmic trading and market making firm, Aurous, also <a href="https://blockworks.co/news/nexus-loses-millions-in-maple-finance-credit-pool" target="_blank" rel="noreferrer noopener">missed payments</a> totalling 2,400 wETH ($2.9 million) in the same lending pool.



M11 Credit has since <a href="https://medium.com/@M11PoolDelegate/m11-credit-update-on-orthogonal-trading-9f896c264f8f" target="_blank" rel="noreferrer noopener">declared default on-chain</a> on credit loans totalling 31 million USDC and 3,900 wETH ($4.7 million)



Outstanding Auros loans will remain in a late, unpaid status after a <a href="https://medium.com/@M11PoolDelegate/maple-2-0-implications-on-m11-pools-b2e19f803990" target="_blank" rel="noreferrer noopener">review</a> on the financial position of Auros deemed “that even without a successful restructure, we should be able to recover a large majority of the assets for liquidity providers.”



A legal recovery process is <a href="https://medium.com/@M11PoolDelegate/m11-credit-update-on-orthogonal-trading-9f896c264f8f" target="_blank" rel="noreferrer noopener">in the works</a> for Orthogonal Trading losses and withdrawal requests will be processed alongside the Maple 2.0 update. 



“2022 has highlighted opportunities for improvement at a protocol and industry level,” the Maple team wrote. “We hope that Maple 2.0 is evidence of our commitment to continuous improvement and that the Maple team endeavors to be a long-standing, credible ecosystem player.”&nbsp;



Maple will also adopt another token standard, ERC-4626, for further interoperability and partnerships within DeFi — however it will stop servicing loans via the Solana blockchain, nine months after it began doing so.



A 2023 product roadmap which supports Maple’s objectives will be released in the coming weeks.



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Maple Finance Opts for Immediate Defaults To Curb Bad Loans

<div id="highlights-block_63486295154b3" class="highlights">
 <ul>
 <li>Existing investors Dragonfly Capital, Nascent and Ethereal Ventures participated</li>
 <li>The raise will be used to expand MetaStreet’s products</li>
 </ul>
 
</div>



MetaStreet, a metaverse-oriented decentralized interest rate protocol, has raised a fresh round of venture funding as the startup readies its latest product.&nbsp;



The $10 million capital raise — ahead of the launch of what MetaStreet dubs “PowerSweep” — brings the company’s one-year funding haul to $24 million.&nbsp;



The round received participation from existing investors from Dragonfly Capital, Nascent and Ethereal Ventures. New investors include Fintech Collective, DCG, TheLAO, Focus Labs, Mirana Ventures, Metaversal, OpenSea Ventures, Ledgerprime, Meta4 and Flying Falcon.



In an exclusive interview with Blockworks, Conor Moore, co-founder of MetaStreet, said all the capital raised will be going toward product development, marketing and hiring.



“Previously we were only focused on the capital deposit side of the equation, and now we’re expanding our offering to help solve problems directly for borrowers,” Moore said.



MetaStreet operates as a capital provider and is the architect behind the infrastructure required to automate the underwriting and execution of fixed-rate, NFT-backed loans. 



Its latest product, PowerSweep, is vying to increase the purchasing power of NFT traders by allowing them to buy and sell NFTs on margin via Reservoir, a Web3-native NFT order book protocol.



“The integration with MetaStreet basically allows users to make a transaction but do it with leverage instead of all their own capital,” Moore said. “It&#8217;s focused on borrowers and the origination side of the equation.”



Moore said that the next iteration of their product would be to improve scale and efficiency on the borrower side.



MetaStreet has facilitated around $40 million of lending volume to date, according to Moore. In fact, the protocol was the facilitator of <a href="https://cms.blockworks.co/nft-lending-market-reveals-a-need-for-liquidity/" target="_blank" rel="noreferrer noopener">two of the largest</a> NFT-backed loans at 8.3 million DAI and 8 million DAI respectively.&nbsp;



After launching its vault product, Moore says at any given time there are roughly a few million dollars in the vault from users.&nbsp;



“We’re fortunate to be deeply entrenched in NFT finance at such a formative period of time in the lifecycle of the metaverse,” Moore said.&nbsp; “This is one of those unique moments in an industry’s growth where everyone who’s here today is simply focused on bringing new users into the space, an entire blue ocean of opportunity.”



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MetaStreet Secures $10M for NFT Loans in the Metaverse

Ben Strack

<div id="highlights-block_62f40b2dad3f8" class="highlights">
 <ul>
 <li>Genesis’ loans outstanding dropped from $14.6 billion in the first quarter to $4.9 billion in the second quarter</li>
 <li>The firm’s custody business processed its highest number of quarterly transactions, an 8% jump from the first quarter</li>
 </ul>
 
</div>



New loans from Genesis&#8217; lending desk declined 9% during this year’s second quarter, the firm revealed Wednesday, while active loans outstanding dropped 66% from the prior period. 



<a href="https://cms.blockworks.co/tag/genesis/" target="_blank" rel="noreferrer noopener">Genesis</a> launched the first over-the-counting bitcoin trading desk in the US in 2013 and facilitates billions in monthly crypto trades, loans and transactions. 



The company’s active loans outstanding, as of June 30, amounted to $4.9 billion — down from $14.6 billion at the end of the first quarter. Challenging credit markets gripped the industry during the past three months.



US dollars and equivalents made up almost 54% of Genesis’ loan book, up from 48% at the end of the first quarter amid what the report called a “flight to quality.”&nbsp;



Bitcoin now makes up more of Genesis’ book, with its BTC loan weight rising from 28.7% to 30.4% quarter over quarter. Ether’s weight shrunk from 16% in the first quarter to 11.4% at the end of June, reflecting its relative price underperformance from April through June.&nbsp;



Genesis’ lending desk originated roughly $40.4 billion — down 9% quarter over quarter — as crypto lending suffered a strong contraction in recent months. Most of those loans occurred in April and May, as the collective crypto market capitalization shed more than 40%, from $2.2 trillion to less than $1.3 trillion.



A Genesis spokesperson declined to comment beyond the report.&nbsp;&nbsp;



<h3>Digital Currency Group absorbed Genesis losses</h3>



This year’s second quarter will likely be remembered as “one of the more dramatic in the crypto ecosystem’s history,” the report says.



<a href="https://cms.blockworks.co/crypto-fund-three-arrows-capital-facing-potential-insolvency-report/" target="_blank" rel="noreferrer noopener">Three Arrows Capital (3AC) first revealed it was facing potential insolvency</a> in June after a $400 million liquidation. 3AC took a major hit with the <a href="https://cms.blockworks.co/tag/terra/" target="_blank" rel="noreferrer noopener">collapse of Terra’s stablecoin</a> in May due to substantial investment in the ecosystem’s LUNA token.



Though <a href="https://cms.blockworks.co/genesis-reveals-exposure-to-bankrupt-three-arrows-capital/" target="_blank" rel="noreferrer noopener">Genesis had loan exposure to 3AC</a>, Genesis parent company Digital Currency Group assumed liability of losses from those loans, the company noted in Wednesday’s report.



<a href="https://www.linkedin.com/in/simon-jones-9498239b/?originalSubdomain=uk" target="_blank" rel="noreferrer noopener">Simon Jones</a>, CEO and co-founder of <a href="https://www.voltz.xyz/" target="_blank" rel="noreferrer noopener">Voltz Labs</a>, told Blockworks Genesis’ falling lending numbers reflect what he called the “CeFi collapse” and macroeconomic factors. Centralized finance lender Celsius, for example, <a href="https://cms.blockworks.co/celsius-to-file-for-bankruptcy-imminently-report/" target="_blank" rel="noreferrer noopener">initiated bankruptcy proceedings</a> last month after <a href="https://cms.blockworks.co/celsius-lending-platform-suspends-withdrawals-and-transfers/" target="_blank" rel="noreferrer noopener">suspending withdrawals and transfers</a> in June. 



“Some of these lending businesses are getting squeezed on both sides,” Jones said. “If they are sourcing capital from traditional finance…rates are going up, and then in DeFi, yields are going down, which basically means the rate they can charge to a borrower…is going down.”



Though Genesis’ new loans and active loans outstanding saw declines, the company’s spot desk traded about $17.2 billion in the second quarter — a 51% increase from the prior quarter. Its derivatives desk traded $26.6 billion, down 4%.



Genesis Custody processed its highest number of quarterly transactions, an 8% increase from the first quarter. The business also saw a 20% jump in the number of custody clients during the period.



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Genesis Active Loans Dropped 66% in Q2

Sam Reynolds

<div id="highlights-block_6195746f3417a" class="highlights">
 <ul>
 <li>Maple Finance is launching a syndicated loan product with Alameda Research, to provide Alameda with trading capital and institutional investors exposure to their DeFi yields</li>
 <li>The loan is currently at $25 million, with plans to expand it to $1 billion over the course of a year</li>
 </ul>
 
</div>



For institutions, DeFi can produce some eye-watering yields in the double or even triple digits. However, <a href="https://cms.blockworks.co/vesper-joins-forces-with-blockforce-to-create-defi-fund/" target="_blank" rel="noreferrer noopener">to get access to these yields</a>, institutions need to hold tokens, which is an obstacle due to infrastructure, education and even compliance reasons. 



In an effort to solve this problem, Maple Finance is providing an alternative: a syndicated loan product for Alameda Research — a trading firm, market maker, and investor —&nbsp;designed specifically for large-cap institutions to access debt capital markets.



This would allow institutional investors to get access to yields from Alameda’s trading, or the tokens it invests in: the eponymous “<a href="https://dchained.com/blog/the-rise-of-sam-coins/" target="_blank" rel="noreferrer noopener">Sam Coins</a>” named after Alameda’s Co-CEO Sam Trabucco, and founder Sam Bankman-Fried.&nbsp;



<blockquote class="wp-block-quote">“This is a first where a crypto company is syndicating a loan through an on-chain vehicle to other institutional investors in the space,” explained Maple Finance CEO Sid Powell in an interview with Blockworks. “This allows Alameda to tap capital from institutional investors. They can use this for their trading, investments or other business purposes.”</blockquote>



Institutions don’t need to have a specific opinion on a DeFi token, Powell explained, as they will get yield from Alameda’s activities, broadly.



Powell equates this to setting up a figurative crypto SPAC, bypassing the usual investment banks — that might see Alameda as toxic anyways — and directly connecting borrowers with lenders.&nbsp;



“Companies previously went through investment banks to tap capital markets, then they started going directly and taking charge of their own presence there,” Powell said.&nbsp;&nbsp;



This process is long and bureaucratic, according to Powell, who gave an anecdote about the process of a syndicated loan from a traditional financial institution like JPMorgan. “That’ll take 12 weeks,” he said.&nbsp;



But because of the blockchain-based nature of Maple Finance’s syndicated loan, it can be expanded on-demand or Alameda can create a separate series of loans when required.&nbsp;



“It’s the <a href="https://cms.blockworks.co/webinars/the-defi-mullet-the-future-of-defi-and-fintech/" target="_blank" rel="noreferrer noopener">DeFi mullet</a>,” Powell said, referring to the process that pairs institutional compatible FinTech at the front and DeFi at the back. 



At launch, the loan is currently $25 million with plans to expand it to $1 billion over the next year.



<hr class="wp-block-separator"/>



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