Maple Finance has revealed a major protocol upgrade aimed at making defaults and liquidation procedures less burdensome in the wake of recent defaults.
Maple Finance is a decentralized credit market powered by blockchain technology. Instead of requiring loans to be overcollateralized, it instead allows managers to issue loans from its lending pools based on a set of risk-management criteria, according to the protocol’s documentation.
But in the wake of FTX’s collapse, the platform experienced two major defaults from borrowers on the platform. Algo trading and market maker Auros Global missed its payment of 2,400 Wrapped Ether following Alameda’s demise, causing the loan to go into a five-day grace period. That grace period has since passed, and the borrower has begun to incur penalties.
Days later crypto hedge fund Orthogonal Trading admitted to having been severely impacted by the collapse of FTX, prompting M11Credit to issue a notice of default on the fund’s $36 million in loans.
The new protocol overhaul, dubbed Maple 2.0, will upgrade its smart contracts so that defaults such as these can be more quickly handled and settled by loan managers, known as pool delegates.
Pool delegates now provide first loss capital, meaning they are the first to suffer in the event of a default. The Maple team believes this will more closely align pool delegates’ interests with the interest of lenders. The upgrade also introduces the automatic compounding of interest, so that interest earned is automatically reinvested into the pool and does not need to be redeposited.
