Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Maple Finance: On-Chain Institutional Yield & Lending Markets - Sidney Powell

Episode Date: April 25, 2025

With an extensive experience in traditional money markets, Maple Finance was envisioned as an institutional capital marketplace which combines the transparency & capital efficiency of blockchains with the regulatory framework of TradFi. Unlike many DeFi protocols that require over-collateralized loans (e.g. Aave), Maple also specializes in under-collateralized lending, enabling greater capital efficiency for institutional borrowers. With over $6b in loans since its inception, Maple plans to further expand its offerings by including RWAs as collateral assets.Topics covered in this episode:Sid’s backgroundThe vision behind Maple FinanceMaple’s tech stackDeciding risk profilesOver-collateralized vs. under-collateralized loansAssets accepted as collateralDeploying to other blockchainsInstitutional appealManaging defaultsRWAConverging DeFi & TradFiBiggest challengesExciting upcoming trendsFuture roadmapCrypto correlation or decoupling?Episode links:Sid Powell on XMaple Finance on XSponsors:Gnosis: Gnosis builds decentralized infrastructure for the Ethereum ecosystem, since 2015. This year marks the launch of Gnosis Pay— the world's first Decentralized Payment Network. Get started today at - gnosis.ioChorus One: one of the largest node operators worldwide, trusted by 175,000+ accounts across more than 60 networks, Chorus One combines institutional-grade security with the highest yields at - chorus.oneThis episode is hosted by Friederike Ernst.

The mix on the borrower side has been it shifted more towards primes. They provide margin to their clients and then they do significant amounts of OTC trading, but also on-chain hedge funds and yield funds. So they might want to borrow from us against collateral that is actually forming part of a yield strategy they're doing on chain. But they borrow from us to lever those strategies. And then the other one would be liquid token funds. So they might have a position they have high conviction in. It's too expensive for them to finance the position using perps and they don't want to risk a liquidation.

So instead what they do is they could purchase the position, post it to us as collateral, borrow dollars and lever up that position or invest in other deals that they want to. Increasingly what shifted this year is we've started taking in more family offices than high net worth. You know, they might want to purchase real estate using crypto holdings that they've accumulated over a number of years. From us, what they're looking for is certainty on rates, making sure that they almost never are in danger of getting liquidated. So they'll post significant over collateralization and then counterparty risk. Welcome to AppaCenter, the show which talks about the technologies, projects and people driving decentralization and the blockchain revolution. I'm Frederica Ernst, and today I'm speaking with Sid Powell, who is the CEO and co-founder of Maple Finance, which does on-chain lending in various flavors we'll talk about in just a bit.

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matters. Join the NOSIS community in the NOSISDAO forum today. Deploy on the EVM-compatible NOSIS chain or secure the network with just one GNO and affordable hardware. Start your decentralization journey today at nosis.com. Cool. So it's super nice to have you on. Maybe before we dive into Maple, tell us about yourself, kind of like before Maple. What was your journey like? Yeah, for sure. And first of all, thank you for having me on. I've been a long time listener to the podcast. So my background was actually banking and banking and finance before I got into crypto. So I used to work in an area called securitization at one of the bigger commercial Australian banks. And it sounds like a mouthful, but effectively what it was was helping large lending companies to borrow from both banks

and capital markets so that they could give smaller loans to their customers. So I was always kind of very familiar and enmeshed in the lending business. And then after I'd been there for a few years, I could kind of see that banks are a very big political organization. And I'd always sort of wanted to start something or be it a more entrepreneurial company. So I had the opportunity to go to a smaller commercial lending company. And that was actually where I met my co-founder, Joe. And so he was running finance. I was running treasury. And that company would do loans to small to medium businesses in Australia. So still commercial lending. And whilst there, you know, we were trying to set up a funding line with a large bank.

ostensibly so that that business could grow. And it was whilst doing that, that we started, you know, investing on the side in crypto and then thinking about, could we tokenize what we'd been doing? So, you know, kind of institutional lending and issuing bonds and do that using smart contracts and using a blockchain. And so this was like late 2018 and then started working on it kind of on the side in 2019 and into 2020.

And we made just about every possible mistake that you can in terms of thinking, thinking about the idea and getting started. So, you know, this included everything from trying to do peer to peer lending with like anonymous people on the internet using a blockchain. And eventually we came around to the idea of doing institutional lending. And so that was kind of how we, that was kind of how the original sort of business model from April evolved. But those backgrounds were really more on the finance side rather than than the technical side.

So what was the specific gap in the market that you were trying to fill? Because kind of like even at that time, there were already some lending markets around, right? Yeah, it was still remarkably early. So if I look at when I first wrote the white paper for Maple, it was, would have been like January 2019. And as I'd been, you know, as we'd been like investigating crypto and defy, like the entire defy space at this time, you have to remember was about, five companies. It was Maker, set protocol, D-Y-D-X, a company called Dharma that was also trying to do peer-to-peer lending and compound. So the beginnings of kind of defy and on-chain lending had begun, but what we wanted to do

that was going to be kind of different was we wanted to focus on large tokenized bonds, effectively like what I'd been doing in in banking and the kind of the insight was you know we used to do many different layers of bonds um what you would call trenches and the insight was well if you have software could you just program it so effectively every dollar is a separate trench you know you could almost kind of scale it to infinity and so that was what really got me interested in smart contracts and the idea of doing this on chain to begin with but um as we got started doing Maple, we had to kind of find a differentiated angle for doing this. And a lot of people were already doing over collateralized lending. So what we started to look at in 2020 was could we do

institutional loans to corporate borrowers, but use the pool concept that have been kind of popularized by compound and by Avey, which had just rebranded from EFLend at the time, but bring a professional underwriter who could also put in first loss capital. So it started to look almost like a credit fund on chain, but we had to separate ourselves from the players who were already doing over collateralized lending. So Maker, Ave, and Compound. And I'm a very big believer that you have to kind of differentiate and find your niche if you want to be successful. Otherwise, it's very difficult to just go in and try and compete with folks who are already quite scaled and set up.

So the reason why kind of the over-collateralized lending markets came first was because it's much easier, right? Kind of like if you do under-collateralize lending, you have to deal with kind of all sorts risk underwriting and kind of like some sort of reputation and kind of like there's price arches.

and I mean, it's kind of like it just compounds the complexity of over-collateralized lending markets, right? And so kind of, and then kind of you already were thinking about kind of like targeting TreadFi players who by and large are much more risk-averse than kind of like people who were already in the space. So it kind of, it sounds like you have. kind of had to start off on a backhand, right? So kind of kind of taking the more complex technical route and then also pitching to players who may not be the most, yeah, who may not have the biggest risk affinity. Yeah, no, no, that's totally correct.

And as we got started, like we did try and approach it from a number of different angles. So, you know, initially we looked at doing peer-to-peer loans and I would read all these white papers and studies of the returns on the returns on lending club and portfolios and on deck. But we found that it's a really difficult business to be in doing peer-to-peer consumer loans. And so we tried doing that with our own savings. And then we shifted because we realized it wasn't scalable. And so the idea was, okay, well, you could lend to businesses.

They produce management accounts. You just identify which ones are profitable. Whereas if you're lending to a consumer, you're really. risks are much more idiosyncratic. Are they going to use the money to go gamble? Are they using it to make risky investments? The types of events that trigger you, you know, pull you into default when you're lending to consumers are fraud, they get divorced, they get ill. And all of those are really hard to predict. And you had this big adverse selection problem where the people who are going to come to you to borrow, if they were crypto individuals, would often be, you know,

adversely selected. They couldn't get finance elsewhere. And so we're really concerned about going into that line of business, whereas with companies, by 2020, you'd started to see profitable crypto firms. There were the beginnings of the market makers like GSR and others who were crypto-native, so they didn't have access to banking finance, but they were profitable in crypto terms. And so you could look at their management accounts. You could, you know, you could meet them, understand their business models. And by that stage, also remember that the macro backdrop was that rates were trending to zero around 2020. You know, post-COVID, the system was flush with liquidity. And so if you're able to lend to these parties at a spread of, you know,

9, 10% versus T-bills, people were extremely interested in that and the system was flushed with liquidity. So there were a number of factors that kind of came together in a bit of a confluence. There was the rise of crypto trading firms. There was the backdrop where rates were kind of near zero on everything else. And then there was the fact that people were already very comfortable by this stage with over collateralized lending and the natural next step was to then progress to under collateralized lending. Okay. Yeah, that makes perfect. Perfect 10. So maybe before we kind of go into kind of like the business case again, walk us through the core technical stack. So I'll contrast what it was then to kind of what it is now. Now, back then,

we were built kind of purely on Ethereum and the technical stack was solidity code where we could take in USDC deposits. People would mint an LP token that represented their proportional share of the pool. And then you would have this manager, which we call the delegate, who would then determine the terms on which loans could be sent out. And then the loans would be sent using a smart contract. So a borrower would request a loan. This delegate role would approve the loan.

And then the terms would then appear on chain in a smart contract loan. So interest rate, term amount. And where it's evolved to over time is our code base has gotten much more sophisticated. So still predominantly in solidity, like most of our most of our, most of our loan originations happen on ETH mainnet. And nowadays, the stack is kind of a hybrid of C-Fi and D-Fi. So when you deposit on Maple, you still mint an LP token. That's a 4-6-26-volt token. It accrues yield for you. The pool is denominated in USDC. We now perform the role of approving all of the loans. So a borrower request alone and our contract fires off the money

straight to their wallet, still with the interest rate and other terms coded in, but now they can post collateral, and this is an important differentiating factor. They can post native BTC, Solana, XRP, to qualified custody accounts or to a fireblocks account. And so we manage the collateral more off-chain without using smart contracts, and that's become kind of a core value add for a lot of these institutional borrowers, while our loans themselves and the deposits are all on chain managed through smart contracts on Ethereum. And then we've also used recently layer zero OFTs to push some of these LP tokens to other chains. So we're trying to ensure that we can achieve distribution across the other chains. But is it still a pooled approach? Or am I met?

Pulled approach, yes. And how do you decide kind of which risk profiles to kind of allow into the pool? Because kind of like underwriting risk is, it's quite a feat in itself, right? And kind of like you have to decide kind of like who qualifies for kind of like which interest rate, right? And so it's it's partly art, partly science. Previously under the old model where it was the under collateralized lending, it was much more of an emphasis on review of the balance sheet of the bar. borrowers. So how much equity do they have? How much debt do they have? How profitable are they and how

much money do they make? Because that services your interest. And then we would review financials on a monthly basis. So we get updated financials from from the borrowers. And it was, we also used more third parties back then. So we'd have this kind of third party platform model where we wanted other people to run pools and we thought that was much more scalable. What we found since then is we still copped the reputational risk when something went wrong. So we decided to bring that delegate role in-house. So now we are the primary underwriter. But the model of underwriting is shifted much more to collateral-based underwrite. So now it's more, okay, we've accepted BTC. What's the right LTV? Is it 70% or is it 80? And we manage the risk by having kind of two trigger levels. So we have

your initial loan to value, which is if you give me a million dollars, I give you 700,000. loan. That's a 70% LTV. And what I would do is I would set a margin call level at a higher LTV. So let's say 80. And at that level, you have 12 hours to post me more collateral if your BTC drops in price. And then a liquidation level above that, which is no more questions asked. I'm just selling your collateral as a kind of stop loss. And that would be like 85. This is if we're talking about BTC. But as we start to look at other forms of collateral, we've underwritten loans against Solana against XRP, we would typically do a lower LTVs because we're more, those assets just have higher volatility and less liquidity in the market.

And so what we're looking at as we try and underwrite a new piece of collateral, if a deal is proposed to us, is we would look at what's the biggest drawdown that assets had over the last couple of years over both a day and a week. And that determines how long. long it's going to take us to exit the position if something goes wrong. So that's very different for something like a cash or, you know, polygon or a pole, I should say, or some other alt-coin versus Bitcoin. And then we'd look at, we go and speak with the OTC desks and see, okay, like, how much size could you guys move in a day if we needed to sell? Because that's going to determine our risk level and what kind of slippage we would take. And then lastly, we also take collateral yield. So

If I lend to you and you give me Solana, I'm staking it and I'm collecting the collateral yield there. So we have to look at how long does it take us to unbond it or unstake it if we're going to do that. And that determines how much of it we can stake. If there's a really good liquid-staked token version of it that has a lot of liquidity, then we can stake more. If there's not, then we would stake less. But that impacts what LTV I'm going to offer the borrower and what rate. In the market today, Bitcoin back to lending has compressed significantly in rates. So now a 70% LTV loan would fetch around 6%, 5.5% to 6%, whereas in December, that would have

fetched 11 or 12%. So the rates can vary, very dramatically. Whereas if I were doing an alt-coin-backed loan, I'm probably still going to be getting north of 12% total return on that type of lending. So we've seen spreads between what you call like almost investment grade credit and high-yield credit shift quite significantly, or widen significantly, I should say. Now that kind of like you mainly do over-collateralized lending too. How do, how would you say kind of the Maple customer base kind of is differentiated from the other lending protocols that are out there?

Yeah, it's a good question. I would say when we're doing more under collateralized lending, the borrower base was primarily market makers. That doesn't work anymore when we do. over collateralized lending because market makers, the way to think of their business model is they have the lowest cost to shift between assets. So it's almost never a good idea for them to post collateral. Because if they have BTC and they want to borrow dollars, they would just sell the BTC for dollars and they're going to get less slippage than anyone else in the market. They can do it the most efficiently.

So it would never make sense for them to post me the BTC and borrow the dollars. And so the mix on the borrower side has been, it shifted more towards primes. So I think, you know, some of these large businesses with kind of like multiple different lines. So, you know, there's folks out there in the market like a galaxy or like a hidden road. This is a prime type of business. They provide margin to their clients and then they do significant amounts of OTC trading. But also on-chain hedge funds and yield funds. So they might want to borrow from us.

so that against collateral that is actually forming part of a yield strategy they're doing on chain. And this could be on Pendle, could be on Athena, could be on levels money. It could be on any of these kind of stable coins or on chain yield products. But they borrow from us to lever those strategies. And then the other one would be liquid token funds. So they might have a position they have high conviction in. It's too expensive for them to finance the position using perps and they don't want to risk a liquidation. So instead what they do is they could purchase the position, post it to us as collateral, borrow dollars and lever up that position or invest in other deals that they want to.

So those are kind of the core constituents. Increasingly what shifted this year is we've started taking in more family offices and high net worths who now, you know, they might want to purchase real estate using crypto holdings that they've accumulated over a number of years. And so they want from us, what they're looking for is certainty on rates, making sure. that they almost never are in danger of getting liquidated. So they'll post significant over collateralization and then counterparty risk. If you've got somebody who's got 200 million in ETH, they don't want to post it in an RV or in a maker and risk getting liquidated. Somebody got liquidated for 100 million in Maker the other day.

That person, if they'd done an OTC-style loan with somebody like us, they would have been able to have 12 hours to meet a margin call and we would have been, you know, alerting them that there's issues with their deposits. So that's the other reason that folks might be willing to pay a little bit more to deal with us rather than dealing with a pure smart contract. On the, on the yield side, which is the other side of our product, folks putting cash with us to get a yield, it's high net worths and family offices are very early adopters. They're like a core constituent for us. But increasingly we're getting professional asset managers who might be managing money on behalf of a foundation and they have a yield target they need to hit whilst being

fairly conservative. And then also corporate treasuries are increasingly putting money with us because they view the Bitcoin, the Bitcoin and Ethbacked lending product is like akin to an on-chain money market, but paying, you know, paying a reasonably higher yield. Cool. Yeah, no, that there was a very good overview. Remind me what assets can be used as collateral and which ones can be borrowed. So you already named Bitcoin, Solana, ETH, Polygon. Is there, how long is the list? It's actually not too long a list. Like I would say, we have less than 12 different kinds of collateral on board it at the moment, or that we're actively lending against. At the most conservative, if you have BTC, which just by way of its market cap is generally going to be preferred

for parties. And then as you go down the list, you hit Eif, Solana, XRP, all like extremely liquid. And these are, you know, these are top five assets. So very comfortable with those. But as you go further down the list, some of the ones that we've underwritten have been, you know, we did the PT token for SUSDE, so Athena. And that was because a hedge fund was running a, a, a looping strategy using Pendle and Athena.

And in our view, it was effectively like the collateral was almost a zero coupon bond that just drags towards one over time. But even still, we still will spend two weeks going through due diligence on those assets. So our smart contract team will look at all of the code and the audit reports. We will look at whether the assets are supported on the wallets that we use, whether it's Firebox or Porto or Copper. and then we'll speak with the OTC desks and see what kind of slippage we could get if we needed to liquidate at short notice. But the other assets that we've done, as I mentioned, Pohl, we've done Treehouse, Eth, we've done a cache, smaller exposure there that we closed out recently.

And then we've done Lombard BTC was another one that we actually did in decent size. and so I would say one of the, if you look at how we compete, we don't have the scale of somebody like an Arve. So what we have to compete on is we can take native BTC and other assets and other chains because we're integrated with custodians and fireblocks. And we will also try and keep an open mind around underwriting new collateral. So somebody, you know, one of the ones we didn't underwrite or didn't approve was USD0 plus. So we looked at that kind of twice and declined it both times. But, you know, hedge funds and different on-chain asset managers can always come to us with a proposal and we will look at it in kind of good faith and see if we're comfortable underwriting it.

But as I said, it's kind of like about 12 max different types of collateral at the moment. Okay. And what I can borrow this was, is it always fiat or do you also? One of the more interesting deals we did over the last year was we lent Solana, and this was for firms to hedge the Locked Soul deal. So effectively, you bought LopSoul from the FTX estate at $64, and then if you could borrow it from us when Solana was $150, you would take it, sell it, and then repay us as your Locked Soul vests

through one of the custodians. And so we were hedged because we lent one unit of soul, and we were expecting to get back one unit of Seoul, and you'd pledged one locked unit of Seoul as collateral. But that was an interesting structure where we're happy to do a collateralized loan in something other than stables. And the yields for the lenders that they were getting

was like 6 or 7% wider than what the Salana's staking rate was at the time. So it was like if you had a long-term bullish view on Seoul, it was a very good way to accumulate extra versus what you could get just purely staking. And the firms, for the firms who had participated in the lock deal, they could hedge their exposure. And for overall salina holders, it kind of smoothed the entry of that locked soul into the market

and prevented, you know, prevented like points of concentrated selling. Yeah, absolutely. You already said that you're deployed on Ethereum and you kind of also take assets from other networks. Yeah. Yeah. Which networks are you deployed on? I mean, I understand kind of Bitcoin and so on,

but I kind of like any of the L2s or Polygon or... Interestingly, it's primarily Ethereum. In the past, we've been deployed on Solana and we're working to get back there. I think after 2022, the kind of the lending market on Solana sort of collapsed. And we've seen more recently kind of yield products evolving there, whether it's Camino, Jupiter, drift. And then the other one we deployed on base, but we didn't get a lot of uptake there. We tried that in 2023 with the T-Bill product when we're kind of exploring tokenized money markets. But it's interesting, primarily all the liquidity kind of still resides on Ethereum.

And even if you look at other yield products, whether it's Athena or others, they've bridged to other chains, but almost all of their liquidity and almost all of their TVL is kind of still on Ethereum. So we've tried to keep an open mind about going to other chains, and we would like to get there. But the biggest question we always come back to is like, how much TVL are we going to get there for the resourcing required to support it? And it's even if you've got an EVM chain, it's not trivial to support it. You have to create a new subgraph. you have to organize all your data and then you have to create the web app that connects to all of that data. So it's actually still

pretty significant resourcing cost for your engineering team. But I would say the other ones that we are most kind of bullish on at the moment, barring Ethel 1 would be base has a significant quantum of USDC, Solana

as well. And those seem to be kind of standalone ecosystems that are kind of thriving, despite not having, you know, significant mining or awards programs, unlike some of the other newer ones. And then we also recently committed to be a launch partner on Converge, which is going to be the chain launched by Athena and Securitized, because we're very interested in kind of the bet there. Athena has been able to accumulate $6 billion in TVL. It's a bit under that now.

And Securitize was able to develop, you know, strong relationships as the issuer of Biddle, Apollo's on-chain credit fund. And so they have good institutional relationships. Athena has shown a really good track record of actually securing TVL. And so the bet is, will they port their TVL over to that chain? So I think that's a fairly safe bet that it's going to see good TVL traction. Whereas a lot of the other new ones, you're really effectively taking a venture bet on whether that chain can secure TVL or users, and will it outlast the rewards program.

Why do you think the TVL is so concentrated on Ethereum main net? So in principle, kind of like there's tons of activity going on on the other networks as well. Is it kind of by virtue of ticket size or people, do they have security concerns? Or is it just force of habit? What do you think is that play there? I think it's a few things. And it's probably kind of, it's probably like a combination of several of, these factors. So I think it's partly the lending effect. So if you're an institution, it's easier to make

the case to go to Ethereum, which is battle tested over a number of years, versus even a chain like Solana, which is now several years old and has a very good institutional presence. So I think that's one factor. There are network effects to liquidity and liquidity begets more liquidity. The other one is, I would say, infrastructure. So if you go to one of these chains, do they have a stable coin, like a canonical stable coin like USDC or USDT rather than, you know, like a wrapped version. And then are they supported by like institutional wallets and custodians? That's another big factor. Because if I'm, you know, if I'm, let's say a pension fund who wanted to get fixed income yield on a stable coin, I might not go to, you know, chain number 20 if they don't have USDC there and if it's

not supported in fireblocks and if I can't custody that asset with Anchorage. So I think that actually is like a fairly large barrier to entry for new chains. And then I'd say in the line of work we're doing with yield, people are less concerned about cost, particularly at scale, because for yield products, it's not like trading or derivatives. You're not moving and transacting every day. Often you might put in, you make a deposit and then you don't look at it again for six months until you need to withdraw for some liquidity reasons. So I think that's the other reason why people are not as averse to the cost of transacting on Ethereum or the speed issues versus something like Solano.

Yeah, that makes total sense. What kind of Oracle solutions do you rely on? Because, I mean, that's obviously really crucial part of your business, right? It is. But funny enough, the actual on-chain oracles are not really that important to us, right? because I have the collateral sitting in fireblocks or Porto or a custody account. So I can actually use, you know, Coinbase's APIs or, you know, like Coin Gecko as a backup. I'm less reliant on feeding that information into a smart contract because I keep, my business model is like a hybrid where I have the loans are on chain,

but the collateral is held in these kind of these C-Fi solutions. if we shifted and did more kind of on-chain liquidations, which could be an interesting business case for us, then I would rely more on oracles. But interestingly, we've spoken to a number of Oracle solutions, but it's actually not that integral to our business because the collateral's in those other, you know, those kind of C-Fi solutions.

So we just use APIs typically. That makes things much easier. is there any appetite to kind of go back on the initial assumption that kind of you would serve as institutions first and foremost? So, I mean, so for instance, you could kind of bring some sort of credit scoring on chain or, I mean, is this something that you're looking into because that would be a huge market, no? I do think it's a large market. It's a little bit of a different business like operating model. Like when you start, so you can either do it at scale where you have effectively no customer service, and that would be the model of an Ave or a compound or a spark, which is you just do automated liquidations, but you make your product effectively available to anyone who can post collateral.

And then the C5 version of that is something more akin to lead in or to arch. However, to do that business model, you have to spend a lot on money transmitter licenses and consumer lending licenses. And there's always the kind of the put option of just being sued by your customers. You know, like they default, they claim that they didn't know what they were getting into. And so you actually need to start staffing up like a lot of customer service people. And then you've got to invest in, you know, in that kind of licensing. Whereas when you lend to institutions, it's largely unregulated, borrowing a few states, in the US because they're deemed to be sophisticated parties.

So we've tried to go, we've tried to say, okay, for a given number of hours of underwriting, we can actually earn much more in fees if we do a $10 million loan than if we do a $10,000 loan. And so it makes more sense to it for us to be a leaner operation and service those institutions. But once we start to exhaust that market, then we could look at going in more of a retail direction. The advantage in retail is you get better. pricing power. Like, if you look at players like Ledin and Arch, they're out there lending at 14% to retail when for a given, at a given, like today, we would be lending at 6% on the same

LTV to a lot of institutions or, you know, maybe up to like 10%, depending on, depending on tenor. But it prices, you know, very wide for retail. So I think the answer is we, we're always kind of open to evaluating it, but it would require a significant kind of shift in business operations. And we do think that there's still a lot of juice to squeeze on the institutional side, which allows us to kind of just keep scaling by focusing on what we're doing. Like if you look at firms like Apollo and Ares, which I would say is kind of like our north star of where we want to be in 10 years, they don't typically do kind of like retail lending. They just focus on lending to kind of larger institutions.

And I would say that our angle of expansion is probably going to be as more. assets get tokenized, we'll just start lending to more different kinds of institutions. Yeah, that makes sense. How do you guys manage defaults? So even kind of like with the most prudent underwriting, kind of like you must have had major borrower defaults, especially kind of interpulent market periods, right? Yeah, it's been interesting. I mean, so doing the over collateralized lending, we started that business, we launched that business model in September of 2023. In that time, we've had dozens of margin calls, but we've actually only ever had one partial liquidation, which was during the yen carry on wind in 4th of August last year. So we've had four significant

periods of volatility. What interestingly links all of them together is those periods were kind of all Sunday nights. So if you look at it, like, the biggest, most volatile single day periods are always a Sunday because like Asia comes online and the US is still like offline because it's Sunday and Europe's not active either. So what happens is you get all these liquidations and margin calls come on from like six in the evening on the Sunday and then you, you know, me and like the entire team will be up to like 4 a.m. The most recent one we had was this last Sunday where as a result of the tariffs, we had a bunch of margin calls. But because this is, because we are underwriting institutions and we'll also look at their balance sheet to make sure that they have the wherewithal

to top up their collateral. Typically, we just like our clients, will just meet their margin calls. And we only had one where we had to do a partial liquidation back in August. But even then, we only sold like 20% of their collateral. So that's the other reason they like us is if you do this on an Ave or a maker, you're fully liquidated. You're liquidated, you're wiped out, and they're taking a big commission. Whereas we will only liquidate what we need to get back,

get you back to like a healthy ratio. And we'll be in contact with you for that period and try and make sure that it's, that, you know, you're in the loop as to what's happening. But those periods, so Sundays are their worst for the liquidations. What happens is in a situation like that, just to step through that one, we had an initial LTV with that borrower, so let's say it was 70. I think in that case, actually wanted to go to 80. We did a margin call it, let's say, like 5.5% wider on LTV.

So we contact them, we say, hey, we send them an email, we messages them on telegram, we are trying to get in direct contact with them. you have to post this much or you have to repay this much of the loan. Whilst that's happening, we're contacting the market makers and the OTC desks, and we're trying to put out requests for quotes on, you need to liquidate two million bucks of BTC. And then if the borrower posts, we never fill the quote. If the borrower does not, or if we hit the liquidation level, then we're just sending the BTC or the Seoul or the EF to the OTC desk

and receiving back dollars, which we use to pay down the exposure. The price alerts are automated. The margin calls are automated, but just what's not automated is the actual sale of the asset itself. And that's actually bug or feature. It tends to be viewed more as a feature by the institutional borrowers. They are deathly afraid of an auto liquidation from a smart contract. So it actually helps.

And it kind of helps us with like pricing power with these instos. That makes sense. So you're pretty relaxed, kind of given the current macro backdrop. So kind of I would have assumed that kind of like kind of tightening liquidity and tariffs and shifting risk appetites. And so kind of would keep you up at night. But you're chill? I'm going a little bit more gray, Frederica. But no, it's interesting because we have the, keep in mind, we have the two sides of the

So we have the yield, the yield that we're providing to people who lend with us. And then we have the borrowers who borrow from us. And so what we've seen is that borrowing rates have come down with the macro environment because Bitcoin is depressed. So funding rates and basis are depressed. There's just not as much to do with the assets. So folks are less interested in borrowing. And if they want to borrow, it's going to be at a lower rate.

Like I said, December we were lending Bitcoin, 70% LTV at 12. to 13. Now it's down to like, you know, mid to high single digits. But, uh, what we're seeing on the lending side is that because Bitcoin is not, you know, because Bitcoin is not rapidly appreciating, folks are no longer interested in market beta. So what does that mean? They're, they're actually looking at holding more stables and they're very interested in putting those stables to work. So that business is, is, that side of the business is going very well. We're actually seeing constant inflows. And it's just that the rates that we can put the money to work out are kind of compressing and borrow appetite is kind of diminished. That can always kind of

flip on a dime though. You know, if you can have one solid week of movement in the market and suddenly, suddenly, excuse me, everybody wants to borrow and the dynamic totally flips again. But I would say in this kind of environment that's a little bit sideways, we're actually very comfortable sitting as a yield product, as long as we control our risk underwriting and we're not extending too much credit on too loose terms, like this is a pretty good market for us. Folks are very interested in yield and we'll see a lot of growth. Yeah, that makes sense. How are you thinking about extending the assets kind of more, the assets that you can

borrow on more into the RWA direction? I've always been a big fan of RWA ways. I take the liberty of calling us tokenized private credit. I think private credit is the most interesting sector in Tradfai at the moment. And in one sense, we are in fact, you know, we are in fact that, right? Like I do a loan on chain, the loan is tokenized. I have an off-chain lending agreement. That's basically tokenized private credit.

And why I've been bullish on this type of tokenized private credit is it's the only one where you can't call up your Morgan Stanley banker and order it. tokenized money market funds, tokenized stocks, tokenized bonds, any, you know, you can just ring up Morgan Stanley and get the Tradfai version of that, whereas there's no, there's no Wall Street bankers selling exposure to Bitcoin back loans, which I think are a very interesting asset class, good yield versus the security, and then you can get your money back generally within 30 days. So it's like, it's actually much better than a lot of Tradify products in fixed income. But RWA, so tokenize real estate.

tokenized receivables. We have done lending against tokenized receivables in the past. I think that's interesting because it's high yield, short duration, and so it turns over pretty quick. What we've seen, though, is that RWAs have a buy-side problem on chain. And it's for the reason I mentioned where, you know, the investors can just ring up Morgan Stanley in most cases and get another version of that asset. So, and the other thing is they have a much short of time horizon on chain. So the on chain investors are thinking in one month to six months, maybe 12 months at the, at the wide end, but RWA investors or issuers are thinking in terms of three to five years. And so that mismatch has been the key issue and why RWAs have not taken off in the way that people were hoping.

And that's kind of the main barrier. Like, we would happily extend credit against RWAs if we can bring in capital from lenders and investors and sell them on that kind of, you know, three to five year exposure. And I think that as the space matures, you'll see more people come in who have a longer time horizon for, you know, for investing. And also just if you get much more capital coming into the space, so if stable coin if stable coin issuance goes up to a trillion dollars, you'll have more capital come in. and it will get crowded out of only lending against Bitcoin.

So I think if the rates on Bitcoin back lending compress and rates on RWA back lending, like receivables or real estate, stay wider, then more folks will push into those exposures. And we are agnostic. Like, we would be there to underwrite that type of stuff. For us, the main issue is, is there a market of people on the buy side who want that? And if so, like, then we'll find, you know, we'll find those opportunities and curate them for them. So it sounds like you're working under the assumption that on-chain and off-chain markets will converge. 100%.

What's the time horizon you think that will happen on? I'm terrible at predictions. But I would say I do believe that they will converge because the natural pressure, right, is it's going to happen through competition. And the fact is it's just undeniable that stable coins are a better way to transact and do pretty much anything in finance. if I want to settle a loan, I can settle that loan at 1 a.m. on a Saturday night, if I want, because, and we can just send it directly to that customer's wallet, whereas if we were to settle a $10 million loan through the banking system, the bank might block the transfer.

You've got a key in the details manually, so that might get done. So it's much harder than just the person giving you a single hash for a wallet address. And then you have cross-border FX issues, where if you want to fund, a US dollar loan in Japan, it's very difficult and costly to do so. And so I think the inevitable trend will be it is cheaper, faster, and a better user experience to do this in stablecoin. So I think my bet is that you start seeing more institutional lending and lending against RWAs in the next five years.

And I would say by 10 years, probably more than 50% of kind of capital markets transacting or, you know, kind of institutional lending will be. done in a stable coin in some form or another. So I think it's slower than I would expect over the first five years, but between five and ten, it's probably going to be fast than most people expect. That is actually a very detailed prediction for someone who doesn't like predictions. I like that. Tell me about your biggest challenge kind of from a technical side, kind of in-building credit

market launching. I would say the biggest challenge we've found so far, there's a couple of different angles. So I'd say I'm always kind of thinking most about distribution. And so I'd say the biggest challenge has been on and off ramps, have been a huge one, where we might meet somebody who's very keen on our product, but they're sitting on 10 million in Fiat, and it's a struggle for them to get on chain. And if they're in New York, on ramps won't touch them. They'll face limits from what they can onboard through Coinbase.

So the on and off ramps, I would say, have been kind of the biggest, probably the biggest barrier. Second to that is the prevalence of stable coins. Like I think at 150, or sorry, more like 250 billion total stable coin issuance, or still significantly undersupplied. And if you think of that, it's kind of like, that's the fish tank in which we swim, right? Like the stable coins are the oxygen, or if you're a fish, the water that you need. And as that expands, that gives us more ability to kind of do commerce and to transact. So I'd say those have been two of the bigger barriers.

And then commercially, I would say it's been by side appetite. But technically I would say, you know, being able to take funds from other chains has been a bit of a blocker as well. So I would love for anyone to be able to deposit from any chain into a maple pool and receive the LP tokens. It would certainly help us with distribution. But that's like just not the case today. So that's something that we're currently working on with layer zero. And if that gets solved, then I think we'll be able to kind of scale more. Yeah, that makes sense.

Other than kind of the cross-chain issue, what are the technologies that you're excited about? most kind of for shaping the next wave of growth. I'd be hopping on kind of the hype bandwagon, but I think AI is pretty interesting for us, because we run a fairly lean team. So we're 32 people. I have currently five people on our sales and origination side. And I look at AI,

I look at the potential for AI for monitoring risks. So in collateral, giving me predictions or insights as to when we should be looking to liquidate a piece of collateral or when signs of impending volatility are coming. And then I also like it for the ability to underwrite new loans. So to assess like, well, here's the four things you should be looking out for with this borrower. Here's why this collateral is good. It will be able to scan through a GitHub and smart contract audits faster than a human engineer can. And so, it should save time and allow us to do a much higher volume of loans at much better risk management

than we are currently able to do doing everything manually. So I'd say that's probably like one piece of technology that I'm super excited about. And then, you know, we really kind of talked about the cross-chain side of things. Yeah, that makes sense. So is there the AI analyst thing on your roadmap for this year? It is. We actually have a pilot in place. at the moment. So we're working with a team, smaller team, startup team out of, with a couple of Australian founders that we're pretty excited about. So hopefully we'll have an announcement on that coming soon. But that pilot is around assessing collateral. And we're going to have, you know, we're going to run a couple of test cases where we have, you know, our human team analyze a piece

of collateral. And then we're going to have the AI assess the same piece of collateral and then kind of see where the points of difference are. But I think that's like something that we have in progress at the moment. And I think it's a really easy call for me to make because if it works, there's like a very clear cost saving for us. Yeah, 100%. What else is on the roadmap for the coming year for you guys? So one of the things we've been particularly interested in is kind of like Bitcoin structured products. So we have a partnership with CoreDow, which is a BTCL2 that does proof of And so we have a program where we can take native BTC in a custodian without slashing risk from lenders and investors and produce for them a Bitcoin on Bitcoin yield. So I think that's been pretty interesting.

And for us, it's like it's an interesting hedge on the stablecoins because when the market goes kind of more bullish, folks are more interested in holding Bitcoin. And if they can get a yield on that Bitcoin, it's an even more interesting product. And also, Bitcoin is kind of the dominant form of collateral that's posted by trading companies. So I think there's a big market if we can turn that into an LST, which is one of our product goals for this year, to get them using that as yield-bearing collateral. So I think – and the other thing I just note is whenever I talk with Coinbase or some of these other big institutional OTC desks, the first point of call for all new institutions coming into the space is like they just want to buy Bitcoin.

And so it's a very natural corollary. The very natural next step for them is either, can I get a yield on dollars lending against Bitcoin? They start to think about that. And then the other thing that will think about is can they get a yield on the Bitcoin itself? Because otherwise it's just sitting there doing nothing. And usually because of their investment mandates, they have to keep the Bitcoin in custody. So having a yield product that's intrinsically linked to custody solutions, I think has like a really good edge. so I could see that product scaling quite a bit.

So I'm very excited about that segment of the market. As someone who's very in touch with traditional markets also, but is clearly very crypto-native, kind of as an ecosystem, we have often talked about the fact that kind of when trust in government somehow falters, in principle that should kind of like be, in principle that should be a boon for cryptocurrencies.

But what we've seen so far in practice is that kind of like when traditional markets have gone down, cryptocurrency markets have also gone down, right? Do you think this is a trend that's going to break at some point? Or do you think kind of we'll continue as we have in the last 10 years? It's a good question. So I think Bitcoin trades like a growth asset because largely the price is actually being driven by inflows of new adoption. And so if you look, what would have to happen for Bitcoin to trade as a sort of safer defensive asset is that either people need to rotate out of another asset class defensively or you just need to have people who are already in there who kind of refuse to sell as things are getting bad. But the thing is that most people who are coming in.

to Bitcoin, it's still in this kind of wave of new adopters. And so the people who are coming in are those who are otherwise investing in like growth stocks. And so it trades largely as, it trades largely like a tech growth stock at the moment. You can see it, you can see it in like the correlation with the NASDAQ and with stocks like Nvidia and the MAG 7. I do think it breaks or changes over time, but that point has to be where Bitcoin is at a larger level of adoption worldwide, and then the rest of, you know, the rest of the market would kind of follow that. But I think, I feel like that's probably like five plus years away, because the rate of

adoption, like, it's still, you know, Bitcoin is still quite underpenetrated versus other, versus other asset classes. You know, it's still currently, like, if you look at the allocation, crypto falls, if you looked at a pension fund, they would have their alternatives allocation. which might be max 20% of their book, 15 to 20. And then within that, Bitcoin is going to be like 5 to 10% of that. So you're still talking kind of like low single digit allocation. And it's not until it's a larger, more folks holding it as a percentage of the

investable world and larger percentage of their portfolio that it's really going to flip and become a kind of much more defensive asset. Yeah, that makes a lot of sense. So, Sid, where do we send people to kind of find out more about Maple? So you can find us, our website is maple.finance, and then on X, we are at Maple Finance, and I am at Syrup Sid. So if anyone has any questions, either go to the website and we have like a contact us form or DM us on Twitter or X or tag us on there. But we try and be

pretty active. We do community calls usually once every two, three weeks. But we'd love to hear from anyone who's interested in learning more about Maple. Cool. Super nice. Thank you so much for coming on today. No, thank you for having me, Fritrika.