Before we get started, a reminder that this is not a recommendation or endorsement to buy any tokens mentioned in this tutorial.
One of the holy grails of DeFi is believed to be undercollateralized lending. The most adopted DeFi applications to date, have been money markets which require borrowers to collateralize assets worth more than the total value they wish to borrow. With over $25B across the estimated $81B TVL in DeFi according to DeFi Pulse, protocols like Compound and Aave have grown to be giants of liquidity, given their permissionless, trustless applications for lending and borrowing capital.
However, in modern lending markets, creditors such as banks will assess borrower creditworthiness by using credit checks and other due diligence, allowing such banks and other lenders to make loans to those who promise to pay back over time with interest, without requiring more collateral upfront.
In DeFi, there is no law other than code to assure lenders they will be paid back on time. For this reason, DeFi money market protocols were designed the last few years to require more collateral be deposited upfront and if the LTV (loan-to-value) ratio is not maintained, smart contracts will liquidate the deposited collateral and use it to pay back lenders.
Maple Finance–Undercollateralized Loans for Institutional Borrowers
In the last year, an institutional capital marketplace built on Ethereum was launched called Maple Finance. Maple Finance expands the DeFi economy by providing undercollateralized lending for institutional borrowers and fixed-income opportunities for lenders.
One of the benefits is Maple offers borrowers decentralized, transparent and efficient financing all on-chain. For lenders, Maple is a sustainable yield source with pools of crypto’s premium institutional players. Meanwhile, Maple’s Pool Delegates manage these pools, perform due diligence, and set terms with Maple institutional borrowers.
This DeFi protocol is governed by the Maple Token (MPL), which enables token holders to participate in governance, share in fee revenues, and stake insurance to lending pools.
- Pool Delegates are tasked with seeking approval by Maple governance to launch a pool contract, attract capital, and commit loans. In exchange, they receive two fees: pool-specific portion of the interest accrued from borrowers and a portion of the establishment fee taken upon drawdown of each loan associated with their pool.
- These Pool Delegates undergo a rigorous approval process to ensure quality of liquidity pool management.
- Maple borrowers, who are selected by Pool Delegates, must go through a pool-specific underwriting process prior to receiving their loan.
- Deposits are locked up for 6 months in order to fund consecutive tranches of institutional loans on Maple, but there is no minimum required to participate.
How to Earn 46% APY Lending to Institutional Borrowers
In today’s opportunity, I’ll show how I can earn an aggregate 46% APY denominated in USDC and MPL rewards, by lending on Maple Finance.
Please also be aware of a few major risks.
- Smart contract risk in Maple Finance.
- Oracle failure could contribute to a loss of funds.
- Pegged assets like USDC can de-peg.
- The quoted APY could fluctuate depending on the amount of capital lent/borrowed in the pool.
- As always, this is not financial advice. You should…
Hi! My name is Lark Davis!
I’m a cryptocurrency investor with years of experience and I’ve been making consistent profits in the crypto space.
I’m passionate about helping others do the same, so I run multiple educational channels on crypto investing.
