Maple Finance 2.0 Launched to Accelerate the Procedure for Loan Defaults
The new protocol, called “Maple 2.0,” was put in place just a few weeks after the fall of FTX caused two significant defaults on the decentralized lending platform. In response to recent failures, the crypto lending company Maple Finance has changed its protocol to make it easier to handle defaults and liquidations.
Maple Finance Uses Blockchain to Create a Decentralised Credit Market
Maple Finance uses blockchain technology to create a decentralized credit market. Instead of getting loans from a central authority, people can get loans from anyone. Rather than simply requiring over-collateralization, the protocol allows managers to make loans from its lender pools based on risk-management criteria. There were two significant defaults by borrowers on the platform after the FTX collapsed.
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Due to Alameda’s collapse, the algo trading and Auros Global skipped its payment of 2,400 Wrapped Ether on December 1. This triggered a five-day grace period during which the loan might be repaid. Lender M11Credit stated that the lender’s grace period had ended, and penalties had commenced. The cryptocurrency hedge fund Orthogonal Trading said on December 6 that it was “severely harmed” by the collapse of FTX,” forcing M11Credit to issue a default notice on the fund’s $36m loans.
Before, borrowers could only stop paying back their loans if they missed a payment and ran out of time. This meant that even if the lender admitted in advance that they would be unable to make a payment, the collateral couldn’t be liquidated. Maple said in a blog post that pool delegates could declare a default earlier if a lender meets the criteria for bankruptcy. This would cause the loan to be paid back quickly. The representative can cancel the loan if the borrower doesn’t pay during the grace period. As Maple points out, all lenders in the pool would lose money immediately while recovery is done.
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In the latest version of Maple Finance, several new features are meant to improve whole experience of using the platform. Withdrawals may now be planned and prorated, and borrowers can request a withdrawal at any time, while in the past, they had to wait at least 30 days before making a deposit to take their funds. The phrase “first loss capital” means that pool delegates will now be the first to lose money if there is a default. The Maple team thinks this will more precisely connect the interests of pool delegates’ interests with lenders’ interests.
