Maple Finance co-founder and CEO Sid Powell says that transparency has been the saving grace of decentralized finance (DeFi) amid the prolonged crypto market slump.<\/p>\n
Speaking to Cointelegraph on the sidelines of the Converge22 conference in San Francisco, Powell noted that, throughout the crypto winter, DeFi has continued to operate as intended while centralized finance (CeFi) has become \u201cpretty inactive.\u201d<\/p>\n
Powell suggested that during the market crash, CeFi lenders hadn’t properly \u201cbattle-tested\u201d and weren\u2019t \u201cprepared to liquidate clients,\u201d prioritizing maintaining client relationships.<\/p>\n
\u201cAs the price of Bitcoin was tumbling, they didn\u2019t want to be sending out margin call letters or email hundreds of clients because they wanted to maintain client relationships,\u201d Powell explained, adding:<\/p>\n
\u201cSo, you give them a little bit longer, a little bit longer \u2014 well, suddenly a lot of these loans are underwater, particularly the ones that started on or [were] undercollateralized.\u201d<\/p><\/blockquote>\n
He notes that where CeFi firms are still lending, \u201cthey\u2019re doing so on a 1:1 collateralization.\u201d <\/p>\n
On the other hand, \u201cDeFi is much more transparent,\u201d he explained. In overcollateralized DeFi models, \u201cpeople just got liquidated as BTC and ETH dropped. That happened automatically.\u201d<\/p>\n
\u201cIn DeFi you can\u2019t get away with letting one borrower be half of a lending pool because people see that and they question the risk management there,\u201d Powell said. \u201cAll of the loans are visible, so you had to be much more careful of who you underwrote and how you underwrote them.\u201d<\/p>\n
Powell also added that CeFi businesses were diversified with trading and prime brokerage, which they thought was a strength, but all of their business lines impacted each other:<\/p>\n
\u201cBut if a CeFi lender ran a pool on Maple, that pool would not be affected by what is happening in the trading part of that business. […] It\u2019s restricted and siloed to just the lending activity.\u201d<\/p>\n
Related: <\/em><\/strong>Decentralized finance faces multiple barriers to mainstream adoption<\/em><\/strong><\/p>\nMaple is a decentralized finance credit platform that claims to hold 50% of the institutional crypto lending market as measured by total loans outstanding and has issued close to $1.8 billion worth of loans since its inception in May 2021.<\/p>\n
The Maple loan book \u201cseriously outperformed CeFi,\u201d Powell said, \u201cwith only one $10 million default on $1.8 billion of loans originated and 900 [loans] outstanding at the time.\u201d <\/p>\n
Powell described Maple Finance as \u201ca venue for people to run lending pools,\u201d but said there has been a reduced appetite to lend since June, causing prices for lending to go up from 8-9% to 10-13%, and thus crypto whales and yield aggregators have started to allocate again to lending platforms like Maple.<\/p>\n
Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Maple Finance co-founder and CEO Sid Powell<\/p>\n","protected":false},"author":3,"featured_media":164510,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"yoast_head":"\n
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