Sidney Powell on Maple Finance’s institutional borrowing protocol

0:01i'm ashton addison from event chain for investment pitch media in the crypto coin show and today on blockchain interviews we have sydney powell the ceo and co-founder of maple finance sydney welcome to the show and thank you for taking the time to be here hey today uh thanks for having me on really uh really happy to be here yeah i'm excited for our discussion uh

0:22really interesting d5 play with institutional borrowers that i'm excited to dive into and i would love for you to kick it off for the viewers by just giving a high-level overview of maple finance and some of the solutions you're providing into the space yeah terrific so uh to give a bit of background so uh i came from i came from traditional finance background

0:46and and used to work in debt markets so what we've done with maple is we've built a decentralized marketplace for institutional growth capital so our vision is to help the leading companies leading crypto native companies and institutions to grow their businesses by accessing uh under collateralized loans from the d5 ecosystem and then on the other side of that

1:09marketplace we provide an opportunity for anyone in the d5 ecosystem to earn a yield uh sustainable yield uh from partnering with these companies and helping to fuel their growth definitely and thank you for that intro and i'm curious diving into these problems a little bit more that you're trying to solve with debt marketplaces and decentralized finance is there something wrong with

1:32the core systems that you're looking to reinvent or is it more just there's not enough access for institutional investors and you're trying to open those doors it's a bit of both i would say so uh i think what what we've found is that you you know you now have the first companies uh who are crypto native who have found product market fit they're very profitable

1:58strong balance sheets good growth runways and uh yet they're unable to access the capital from traditional finance that they need to reach their growth potential so our thesis is over the next few years they're going to expand to be many times the size they are now we've found particular traction among market makers market mutual funds among others and also exchanges so i think the

2:24problem that we solve is that they're not able to currently access uh debt capital or borrowing so that they can reinvest in the growth of their businesses uh and then as we look beyond that to non-crypto companies which is where we ultimately want to expand to capital markets are just hugely inefficient they're very globally fragmented and there's a lot of fees and third parties

2:48and a lack of really a lack of integration across the globe of those markets definitely and defy hopefully is making that a little bit more efficient and definitely global and researching into the protocol you have three different players primarily borrowers pools and delegates can you just talk about the protocol of those three parties how it interacts

3:10with each other and and how it does make an efficient capital system within maple finance yeah sure sure so we start with we start with the primitive of a liquidity pool and that's where these liquidity providers come in who are effectively lenders on our protocol so they would deposit stable coins and then institutional borrowers are able to take out

3:32loans from those pools of capital so it's really a peer to pool type model of uh of lending but what's interesting and unique about maple is that each of those pools has this role as you said a pool delegate who kind of manages the pool and they would be a fund or industry professional and what they do is they perform the assessment uh of the borrower's credit

3:54worthiness and then approve the terms of the loan so really what what that delivers for the borrower is kind of the best of an otc star relationship they're able to be confidentially assessed and they're able to get feedback on their loan terms so those are those are three of the uh three of the main participants and then i'd be remiss if i didn't also mention

4:15that there is the maple token which we use to allocate uh to allocate risk and align us in centers across the platform the way that that works is that participants can stake the maple token to a liquidity pool and that provides a kind of reserve which offers protection if there are defaults within that pool in exchange it of course earns a uh a more leverage yield

4:41that's great to know and i was going to ask about that for uh the parties that are lending um i'm guessing you know there's incentives to have a greater yield with maple but there's also other kinds of assets you mentioned stable coins um is there a variety of assets and can you just talk a little bit about the difference for people that are sort of newer to d5 and is there any

5:01difference between lending using maple finance and lending in any other decentralized exchange like uniswap or any other liquidity protocols yeah absolutely and that's a really good question ashton so um for for a liquidity provider a lender on on maple what they benefit from is diversification because they're lending into a pool of loans and then they benefit from not having to

5:26do the credit assessment themselves because we recognize that's a skill set and a time commitment and then they also benefit from having that protection protection or cover offered by the state maple token so that means that if there are a small number of defaults within the pool they're still protected this get this uh this then speaks to the difference

5:47between maple and some of the other lending protocols which is that we are fundamentally under collateralized so we're looking to provide a product which allows crypto native businesses to expand and and grow you know grow their operations uh whereas other protocols tend to be more over collateralized and that lends itself more to speculation because you're putting down

6:09150 to borrow 100 there's no actual credit creation on those protocols definitely and you mentioned for the credit worthiness and for approval of borrowing from institutions there's the delegates and you mentioned that there's you know funds or you know some kind of accreditation for for those delegates but i also was reading that there's a decentralized

6:33asset management and it seems like to have delegates there's some level of centralization can you just talk about the balance between having a decentralized protocol and having the delegates and how that's managed so to sort of balance those two out yeah and and that's a very good question and one that we do we do get asked about so the the delegate is a trusted position

6:53on the platform uh but the way that we balance that with decentralization is that in a mature state there should be many delegates and you could think of each of them almost as if they're operating a note on the platform so each each delegate would be running their own pool and each pool could pursue a different lending strategy say one could focus on a specific

7:15industry like market makers or a specific region like north america or southeast asia but we'll have many a diverse range of these and and many delegates on the protocol and then each delegate is in charge of approving the loans that their pool funds so you can see that in that way we start to have a measure of decentralization because no one delegate

7:38uh plays a critical role on the platform and then uh the accreditation of the delegates or the white listing i should say can then be controlled by maple governance token holders so in that way as a protocol we start to achieve you know uh broad-scale decentralization definitely that's good to know and i was going to ask you about uh the maple tokens you have mentioned

8:02it a couple times uh you mentioned governance in being able to choose the delegates that seems like an important aspect and for liquidity providing for extra yield is there also other requirements for institutional borrowers to utilize the maple token or are there any other functionalities that the maple token is used within the platform and does it

8:22create a sustainable ecosystem for maple finance yeah uh another really good question so i would say the way that we the way that we've set up the protocol we tried not to have the token limit growth and so you can participate as a borrower where you just come on you you create your profile and then you are able to request a loan from from the pool delegates on the

8:45protocol uh without needing the maple token at all and that enables you to come on and and borrow uh in stable coins or in future other currencies uh and similarly to be a liquidity provider uh i.e a lender on the protocol you also don't need the maple token and what we like about that is it means that you can just come on and earn a yield on your stable coins which is highly

9:07desirable for a lot of people in this space at the moment where the maple token comes in is that if you wish to stake and earn a higher yield you would put down 50 maple tokens let's say a hundred thousand dollars of maple token and a hundred thousand dollars of usdc and what you're doing is you're you're uh putting that into the reserve which offers protection to the liquidity

9:31providers and in exchange you would earn uh about 10 of the interest yield that comes through that pool so that should translate to a sort of like a high teens yield um and that's how you can use the maple token to participate and earn a yield the other way aside from governance is that a portion of fees uh get accrued to the maple dao's treasury and then maple token holders can can

9:56vote on what to do with that whether it be to fund development or uh distribution well that's really interesting with the dow treasury and you you mentioned you don't need a maple token to to to get a yield can you just talk a little bit about the yield how is that calculated and does it vary and what is the uh what is the bonus like when you're using maple token versus not

10:22yeah really good question so the way that you earn a yield on the platform as a liquidity provider is that you deposit uh usdc in our first pool uh so uh you're you're locking it up for about six months and that's because this is going to fund term lines now in our first pool we've got uh some of the top tier borrowers who are you know market makers and uh

10:43market mutual funds so in the first pool we have alameda amber group wintermute participating the average yield on the loans in this first pool has been around 12 so then as a holder of the uh as a liquidity provider net of fees you're able to earn about a 10 yield in usdc uh and the intent is that these pools are ongoing so you just put your usdc in and you earn an ongoing yield

11:11over time as loans uh mature and finish and new loans are created and then the pool can grow over time as more people deposit to it the benefit of holding the maple token and you will earn the maple token if you lend into the pool as rewards is that you can then stake that and uh would earn a higher yield that's probably closer to like 15 to 20 percent in usdc and that's

11:36because you're taking a a good chunk of the interest that comes through that pool so you take one tenth of the interest and that comes through to you as a staker of the maple token so you could effectively be both a liquidity provider and a staker definitely thank you for that information sydney and also great to hear that you have some great partners like alameda already in that

11:59first round there and i would love to get a snapshot for the viewers of you know you mentioned the first round where exactly uh is the platform at in terms of the next steps and it's fully functional with this first round and then you know what are the next steps for the summer of 2021 and for the end of this year yeah um great question so yes as of last

12:21week we're aware fully functional up and running on mainnet so we did our first pool of 17 million in loans we closed that the previous the previous tuesday on the 25th and what we did is we took a guarded launch approach so we said let's just do a few smaller loans to great partners we're comfortable with we opened that up and we had uh we took some institutional commitments of

12:47liquidity and then liquidity from the broader d5 ecosystem we thought it might take a few days for that uh liquidity to fill up uh that was about three and a half million but it went in under an hour on the uh went in under an hour uh on the 21st and so where we're at at the moment is we're now just preparing the second tranche uh of loans which will be another 20

13:11million uh because we've had a lot of interest in that and so that will that will um again be uh market makers and market neutral funds who are of exceptional uh credit quality and then a couple of weeks after that we'll be opening up our second pool with our second pool delegate who will be really excited to announce over the course of uh over the course of this

13:32month but that will take us on a path to uh around 50 million 45 50 million in loans originated and then for the rest of this year uh we'll be targeting you know uh targeting getting into the hundreds of millions of loans definitely setting uh setting an ambitious target for the uh for the team to hit very ambitious and great to see that growth and i'm looking forward to

13:55following along uh while that does happen and now on the flip side do you foresee some challenges uh in the longer term what kind of challenges you may have to overcome to become you know the uh name for institutional debt marketplaces in d5 uh as you know maybe five years down the road yeah uh that that's another good question so i would say uh i would say we have no challenge

14:21finding uh finding borrowers and finding credit worthy borrowers uh we continue to receive inbound interest every week uh with very little uh you know very very little marketing effort uh so far um so uh borrowers won't be the challenge we think there's tremendous growth in the crypto native ecosystem uh and we're really looking forward to uh you know to helping those companies

14:43reach their growth potential our main challenge will be sourcing the liquidity to meet uh you know to meet that borrowing appetite and so what we're focused on over the next 12 months is can we start to establish partnerships uh which maybe bridge uh bridge into treadfly to get uh you know to get people who are willing to commit you know 10 50 100 million dollars at a time to the

15:06uh to the protocol so i think that would be our our main challenge just in meeting uh meeting the level of demand we have and the other one is that five years down the track costs of capital are obviously wildly divergent between traditional finance and what you see in the crypto space which is generally higher now my my thesis is that as liquidity improves

15:27we will start to see a compression of that cost of capital in the crypto space and that therefore makes a protocol like maple far more appealing as a capital market solution to these larger companies because ultimately five years down the track i would like companies worth hundreds of billions of dollars to be issuing billion dollar loans now they will

15:47by and large probably be reluctant to do that if uh if they have to pay a mid-teens cost of capital um so i think it's it's getting liquidity into the space so that we can achieve broader access definitely well said and if there are any people that are interested in liquidity providing staking institutional borrowers that are watching what's the best way for them

16:08to get involved with maple finance and learn more uh yeah uh terrific so uh they can follow us on twitter at maplefinance uh they can also email me so sydney my name at maple.finance for an expression of interest uh and then we're also pretty active and responsive on both telegram and discord but i would say either reach out and dm us through twitter or

16:33uh email me email me directly we are receiving tremendous interest at the moment from the first sort of hedge funds and institutions that are considering this uh i mean once uh once the first ones come in uh and earn a yield and you know earn the higher yield um from d5 i think uh you know most of these will never look back it's just an education piece for now

16:57we're also receiving a lot of interest from uh from family offices which tend to have a more flexible mandate definitely great to know thank you for those links i will leave that in the description box below as well all the best with the growth of maple finance i will be watching and let's follow up in the near future thanks very much really enjoyed it

17:17ashton