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Crypto lender Maple Finance almost imploded, but CEO Sidney Powell wants to bring it back
KOREA BLOCKCHAIN WEEK, SEOUL — At the height of the bull market in late 2021, Maple Finance, a cryptocurrency lending protocol, thought it had the hottest product on the market: a way for token-skeptical institutions to capture the returns from Alameda Research’s trading activities.
“The focus was on maximizing returns rather than limiting downside risks,” Maple co-founder and CEO Sid Powell said in an interview on the sidelines of Korea Blockchain Week, where he stressed the need for a shift in perspective. “We were all chasing high returns, not thinking about the potential pitfalls.”
The fall of Alameda and the subsequent crypto crash in 2022 served as a wake-up call for Maple Finance. With borrowers defaulting and lenders fleeing, the company’s total value locked (TVL) was wiped out.
While Alameda was “off our balance sheet” at the time of its implosion, Powell and Maple haven’t had as much luck with Orthogonal, which defaulted on $36 million in loans following FTX. The fallout from Orthogonal highlighted the vulnerabilities in the DeFi space and the need for stricter risk management practices.
Powell highlighted the lessons learned from these defaults, saying: “Diversity was the most important. We wanted more delegates, more borrowers and very strict reporting requirements. »
He also stressed the importance of diversifying into uncorrelated sectors, ensuring that Maple Finance is not solely reliant on the volatile cryptocurrency market.
“Lending to a portfolio of small businesses, such as successful software companies, is unaffected by Bitcoin price fluctuations, introducing uncorrelated sources of credit into the DeFi space, which is beneficial,” he said.
As institutionalized as digital assets have become, many investors and fund managers are simply turned off by the idea simply because they don’t understand the technical intricacies.
Maple’s mission has always been to fill this gap – its Alameda loan product was the first example – and that hasn’t changed despite the upheaval. However, Maple is now bankable thanks to crypto-friendly regulations in the Asia Pacific (APAC) region.
“We want to abstract away as much of the complexity of cryptocurrencies as possible,” Powell said. “My vision for the future is that we could present a family office and say we have a credit and lending product that has lower fees than your average Ares or Apollo credit fund.”