With 2021 drawing to a close, we wanted to take a look back at what shaped up to be a defining year for Maple. There is too much to write to fully recount all of the highs and lows of the year, so we will focus on six pivotal episodes during the year which shaped our team culture and values, frame the current position we find ourselves and the opportunities we will pursue for Maple in 2022. To everyone who has contributed in some way to our journey to this point we are grateful for your support and excited to embark on an even bigger 2022!
The world had been through 9 months of COVID-19 and many countries had totally locked themselves down. Maple DAO had completed a fundraise 3 months previously but was in that awkward organizational adolescence where we were weren’t quite a business but were too large to be called just a project (I still refer to us as a project). There were 8 of us working full time on it and a couple of people were helping here and there on the side, we’d little-to-no formal structure and we were spread around the globe. During the seed raise we had optimistically declared we would launch by January or February. We would not launch by January or February. But it’s kind of a fait accompli that startups are over optimistic on launch timelines - Elon still is.
The state of play was: over the next 3 months we needed to finish our smart contracts and webapp, get an audit, get the first customers. Simple.
The Liquidity Round
We were planning to ship the protocol in April but we would need customers or the launch would fall flat. Enter the Liquidity Round. This was a fresh concept where the protocol pre-arranges commitments to participate in the liquidity mining program. Why? It de-risks the success of the launch at the cost of a high rewards APY. If you’re a founder it gives you back a lot of sleepless nights.
For two weeks my Co-Founder Joe and I hopped on pitching calls at all hours of the night. We emailed a deck to just about every fund or whale in our networks to see if we could get someone to commit to lending. Our target was $15M. It may as well have been Everest because two weeks in we had not a dollar committed.
Coffee. Nap. Call. Repeat. No headway. Were we not understanding them or were they not understanding us? “People can’t understand your rewards program. It’s too fucking complex. If they can’t get it in 30 seconds you’ve lost them,” sighed one of our investors. He was right. We had over-engineered the liquidity mining incentives. The audience couldn’t understand it and therefore didn’t want a bar of it. It was a multidimensional matrix which would’ve had Vitalik scratching his head. Back to the drawing board.
I was meant to be at a beach town near Sydney that week soaking up the sun and doing some hiking with a friend. Joe and I started taking the first calls with a simplified pitch on Monday. The faces on the other side of the Zoom call were less puzzled. This was a good sign, right? We hammered out the final negotiation for a cornerstone on a call at 2am. They would come back to us. 4am, check Telegram, “we’ll do $10M”. Elation. Exhaustion.
We pressed our lead and stacked the rest of the week with calls. I left the AirBnB once in the 5 days but we emerged 3x oversubscribed. We wanted $15M and ended up turning people away at $45M. If you’re stuck, invert the problem and reframe it, but then persist. We had our first customers...launch would not be a total failure...now we just needed a product to launch.
“I think we should wait another week,” someone chimed on the call. There’s always a reason to wait another week. Some detail on the front-end is off which EVERYONE is going to notice, your product will be a laughing stock. Everything could always be more perfect, more flawless. Which sucks teams into the failure-to-launch trap. Next week becomes the week after, which becomes the month after. Launch-crastination.
We had passed the audit. We were confident users’ funds wouldn’t be lost. And yet. The nagging feeling comes up in the back of your brain....what if? What if this goes wrong? You know you’re being ridiculous but the lizard brain is persuasive.
Time for a line in the sand. “Thursday we launch,” Joe overruled. This was it. We scheduled all-hands calls to come together to launch the protocol and check if gas fees had dipped enough. It was going to cost about $30K to launch so we needed to get it right. It was not dissimilar to launching a rocket or invading Normandy. You get together, check the weather and make a go-no-go call, “too cloudy today gents, let’s check back in a few hours”, set your alarm and grab a coffee.
“You see the gas?”...“Low”...“Let’s go”. $30K burned. Waiting for the confirmation.
Confirmed! Protocol live. We breathe a sigh of relief. Nobody’s using it yet but we’re live. As a team we birthed a blockchain baby. Euphoria.
The Token Sale
We still needed to get the token into the hands of the community. We were going to do this through a Balancer Liquidity Bootstrapping Pool. People put in USDC, they receive MPL tokens.
We set up a dark mode front-end with a burnt orange tinge which we were particularly proud of. The launch began on Friday. We held our breath. Did people actually want to be part of this? The price started at $40 and then the dutch auction mechanism kicked in, taking it down towards the $20s. No takers yet except a couple of bots that got rekt by 10% fees in the first 3 mins.
People started to arrive and interest was building. The first trades rolled through. It was like opening a restaurant and waiting to see that your first customers weren’t spitting out the food. Unreasonable joy.
I went for a run. On the way back, I opened a Telegram message from Richard Jones (or some similarly contrived alias). “Hey Boss, we found an issue with your website we’re kindly bringing to your attention.” Good samaritan. Seems legit.
“Can you check to see if your website is down?” It is. “Let’s get a group chat going, I’ll add my security team,” chirps Richard. A knot in my stomach is starting to form. “We’re going to put it back up now. Can you check again”. The knot grows. “We have a proposal for you, send us 20 ETH.” The knot has twins. We’re being cyber-attacked. This is bad.
We gather the team for a call. Its 6am Saturday for our Tech Lead. We have to get the site back up and verify that the attackers aren’t able to get between the site and users funds. Seems they’re shutting down Fleek. A 24 hour game of cat and mouse begins where our tech lead is performing patchwork to keep the site up and shifting where its hosted and the attackers are continuing to shut it down. We check in every few hours. Our Tech Lead is exhausted but soldiering on. After 24 hours we think we have a solution. The site remains up but we wait with bated breath. The hours roll by. 72 hours. The LBP is done. Maple has 1,080 new MPL holders who are members of the community.
One week later we launch the Orthogonal USDC Pool. This is the culmination of 9 months’ of work. It starts with $17M in loans and 8 loans. We leave $4M room for DeFi depositors. “How long will that take to fill up?”...“I’d give it a few days.” An hour later we’re at capacity.
A month later the second Pool opens, managed by Maven 11 Capital. It breaks another speed record. It hits the $22M cap in minutes. Momentum breeds more momentum. 7 months later and one Pool has expanded to four. Today, the Maple protocol has done $535M in originations and 69 loans.
Maple’s first two Pools, Orthogonal and Maven, showed that our delegate-based model worked. Underwriters could be responsible for underwriting borrowers, affording us scalability, provided that accountability for their decisions existed and their incentives could be aligned.
But how large was this market? We were nervous that DeFi native liquidity would stall out and it is fickle in roving for the highest APY. Maple’s Pools needed sticky institutional capital that prefers security and creditworthiness over a few points of APY.
The Lindy Effect was now a tailwind in conversations. By this stage Maple had passed $100M so couldn’t be dismissed in conversation. Yet conversations with a number of institutions would stall. They loved the idea of DeFi but would get whacked on the hand by their compliance teams any time they brought it up. “DeFi, you say?”...“And the yields are WHAT??”... the interest would give way to a doomed sense that their compliance teams would thwart any foray into the promised land of magical internet money. For some teams, being in permissionless pools was a non-starter.
To liberate the mountains of institutional capital and shepherd it into DeFi, we needed to give them permissioned pools that would get their compliance teams comfortable. Enter discussions with BlockTower, we had known the team for over a year and felt aligned with their vision of using Maple as a Platform-as-a-Service to build out their high yield asset management business. They could see the potential of seeding new Pool Delegates who could attack new lending verticals like mining and Real-World Assets.
To bootstrap their pool they would begin by lending from their own balance sheet to borrowers they already had relationships with, starting with Genesis. In Q1 2022 they will take on outside institutional lenders into their pool, with the target of scaling it to $500M before the end of 2022. Importantly, participation in the Pool will be restricted to KYCd lenders who are then whitelisted, ensuring that institutions are able to get comfortable that there are no unknown participants in the Pool.
The Alameda Pool
The Alameda pool was near run thing. Two days before the Pool was meant to launch we had an investor say that they needed to delay two weeks. This threatened the launch and we were concerned the whole tranche would fail. The team went into overdrive shoring up other depositors and seeing who could upsize. It was the 11th hour. We had one day left to find an additional $7M or the first loan would be a fizzle. The sales team pinged every Telegram group and turned over every rock they could find.
No response. Tick tock. Then, a lifeline. One of the investors could pull through, but would need to get approval from the US. He was about to hop on an international flight. “Hope the airline WiFi is half decent”. We’d have our answer in 7 hours. The loan was due to go live that day and the press releases had been drafted. How would it look if we undercooked the first tranche? Don’t think about it.
Checking Telegram every 15 minutes and pacing around the hotel room. “We’re upsizing”. Relief. Reprieve. The loan launches. We score coverage in the Financial Times, Blockworks and The Block. Twelve hours before we had been chewing glass but now we were over the finish line.
The Alameda Pool was termed a “Crypto SPAC”, showcasing that the new crypto power houses didn’t need the blessing of traditional Wall Street to access Debt Capital Markets. What Coinbase had shown with its direct listing, Alameda had now shown with its Maple Pool. The investor appetite was thick and you no longer needed an investment bank chaperone. The target for their pool is $1B in 12 months.
Dawn of the DAOs
After the DAO hack in 2016, many people wrote off the idea that DAOs would ever be trusted again. Yet the number of DAOs controlling $100M or more was on the rise. We had touted ourselves as a DAO Treasury Management Solution for a while but the DAOs themselves weren’t buying it. Evident in the less than $2M we’d received from them.
The trend was clear though. DAOs would control the balance sheets of web3. But at this stage they were disinterested and flighty. Each DAO has its own distinct subculture and conventions that must be observed to do business with it.
Step one was Gnosis. Almost all DAO treasuries are controlled with a Gnosis multi-sig. The Gnosis multi-sig nails one thing perfectly, it provides security to a DAO by ensuring it only spends its money when the right people approve the transaction. Maple wasn’t integrated. We may as well have been speaking a different language. In September we got this sorted, it’s the Dawn of the DAOs.
If you’re going to sell B2B to a DAO, you need to understand their workflow and decision making framework. For DAO sales, this means outreach to the core team, writing a governance proposal, earning the trust of the community by presenting on an AMA call, then finally the token holder vote on Snapshot. Only then will the DAO make the deposit, using Gnosis.
Maven, our Delegate, killed it in this respect. They were deep in the DAO ecosystem, with great relationships and were active governance participants. This is highly unusual for most web3 VCs who wouldn’t know where to find a governance proposal let alone write one. Maven sent out well-written governance proposals to several DAOs including Merit Circle. The request for $10M and accompanying due diligence was better than most paid research reports.
Then came the Community Call, they drilled straight for how credit risk was managed and assessed. A cartel of anons led the charge at question time. It was a blast. If they were going to put in $10M they wanted to be absolutely sure that Maven were properly assessing borrowers. The call wrapped. Time to wait for the governance vote.
The vote passed. Suddenly we had a $10M deposit. At year end Maple had $25M from DAOs. We want to 20x this to $500M by the end of 2022.
What’s in store for 2022?
We learned a lot of lessons in 2021. In particular we kicked some own goals on tokenomics which we will rectify. MPL utility is a big priority on the product side. MPL has utility in that it can be staked to receive a portion of the interest (10%) received in any of the pools. But its crippling flaw has been Impermanent Loss because it needs to be staked with USDC. We’re addressing this with the concept of single-sided staking with a late Q1 2022 target. This will enable MPL holders to stake MPL and receive a yield in USDC.
The future will be multi-chain. Already new ecosystems are forming on other chains and speed is essential in any land grab. So another major initiative will be replicating Maple V1 on Solana. Solana has a fantastic ecosystem, a number of institutions we already work with are active on it and the low gas costs will enable us to scale the number of loans we do. Maple on Solana will feature a new token. The tokenomics of this are still being designed. The Solana Maple token would represent a pure play tracker for the protocols growth on the Solana ecosystem and support liquidity mining, new strategic investors, possible acquisitions and team build out. In the meantime core developments of V2 of Loans and V2 of Pools will continue for the Ethereum and EVM compatible chains.
Our 2022 roadmap is underpinned by three core themes, Interoperability, Usability and Token Utility. We’ll write more extensively on these in a follow up. In the meantime we at Maple would like to thank our customers and community for the incredible support and for joining us on our journey in 2021. Here’s to an even better 2022!