Last week, Maple Finance, a credit facility-as-a-service platform, announced that it had created a new $300 million loan facility for struggling Bitcoin miners.
This means that all of those crypto miners struggling to make a profit in the current bear market now have a ready hand. For this service, however, it will cost miners up to 20% to borrow funds to maintain their operations.
Sidney Powell, co-founder and CEO of the company, said Decrypt at Messari Mainnet 2022 that miners are able to sustain this rate as funding options are limited and traditional banks have rarely been interested in doing business with crypto-native companies.
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Powell calls this specific customer profile the “middle market,” and it’s Maple’s bread and butter. He defined it as: “Any business that is now beyond raising venture capital, but is still too small. They are not listed on the stock exchange. They are not yet multi-billion dollar companies, but they could operate in a niche sector like crypto,” he said. “But because they’re in crypto, the banks really won’t lend to that sector.”
But what’s interesting about Maple Finance is not that it helps miners get liquidity, but how it does it.
Maple looks like a bank, works like a bank, and behaves like a bank, but it’s not a bank. Instead, Maple is a lending-specific web service with which businesses can pool money and find borrowers. It is a technology platform rather than a financial institution.
This $300 million loan pool for miners was funded by another company named Icebreaker Finance, for example.
In this scenario, Icebreaker is called a pool delegate, and their job is to 1) fund the pool with capital and 2) vet all potential borrowers (much like what a bank does). It is the pool delegate’s job to assess the risk of lending to these borrowers, not Maple’s.
“I often use the Shopify analogy, where they provided tools for e-commerce businesses just to build and manage their online businesses,” he said. “We give you the tools to run an online lending business. This loan company is really the delegate. This is the role they fill.
Sam Bankman-Fried’s trading house, Alameda Research, also uses Maple Finance to borrow cheaper capital for its operations. Pool delegates include Coinshares, Abra, and AscendEX. And because the delegate performs significant due diligence on market makers, these loans are also under-collateralized, a rarity in the DeFi space.
On MakerDAO, for example, users must deposit $1.50 in Ethereum for every $1 borrowed. With Maple Finance, however, terms between borrowers and pool delegates are established based on the amount of collateral put in place and the company’s credit level.
This may all sound like esoteric crypto stuff, but Powell and his day found some serious traction. Prior to the Icebreaker pool, Maple had managed $1.8 billion in loans.