Liquidity providers (LPs) play an important role in the crypto ecosystem by funding liquidity pools with their crypto assets to earn a yield. LPs have quickly become one of the most important stakeholders in the crypto ecosystem and are currently supplying $25B+ in DeFi lending protocols.
As DeFi has exploded over the past year, so has the number of ways that people can provide liquidity. Some strategies are relatively straightforward, such as depositing crypto assets in a money market protocol like Compound and earning interest by lending them out. Other are more complex, like writing put options on derivatives platforms like Primitive.
LPs generally earn yield through two sources - the base yield and liquidity mining subsidies. The base yield is the market rate for the asset, generally determined by supply and demand. As you can see in the Curve table above, the current market interest rate ranges from 1% to 10% for stablecoins. Many protocols subsidize these rates through liquidity mining by distributing their native token to LPs in order to raise effective interest rates.
Liquidity mining has contributed tremendously to DeFi's growth over the past year and has helped align protocols with their users. However, it is not sustainable and has attracted a lot of flash-in-the-pan yield farms with users moving money in and out of protocols quickly to take advantage of high rates.
We built Maple in order to create a sustainable yield source for LPs. Many protocols have served 'DeFi Degens' who chase short term yields, but it remains a challenge for long-term focused lenders to earn a competitive return on their assets. A crypto-native credit market that services institutions like funds and market makers will provide a sustainable solution for patient capital.
DeFi Grows Up
There’s an emerging trend of DeFi products built for patient capital. Just as DeFi Index Funds provide passive exposure to DeFi tokens, decentralized institutional lending pools represent a real improvement for yield-seekers that don't want to actively manage a portfolio.
Maple: A Sustainable Solution for Liquidity Providers
Maple allows LPs to generate yield by lending to top institutions in the crypto sector.
- Sustainable Yield - By lending to profitable, well capitalized crypto institutions with sustainable business models, Maple provides robust yield opportunities.
- Set and forget - Each Maple Liquidity Pool is created by a Pool Delegate. Pool Delegates diligence institutional borrowers, and approve the terms of loans with them in return for a performance fee offering a set and forget solution for LPs.
- Diversified exposure - LPs gain exposure to a diversified set of borrowers in each pool and can further diversify their exposure by providing liquidity to multiple pools on Maple with different borrowers and Pool Delegates.
- Structured buffer - All Pool Delegates on Maple must stake their pool with MPL tokens to provide a capital protection layer for LPs. Other MPL holders will also be able to stake the pools to increase this protection in return for increased yield. This ensures that incentives are aligned between participants and provides a protection against defaults for LPs.
Becoming an LP on Maple
We're getting ready to launch Maple on mainnet soon. At launch, there will be one pool available for LPs to provide capital and earn a sustainable underlying yield. Shortly after, the protocol will scale by increasing the number of pools and the size of each pool. Stay tuned for further details as we get closer to launch by joining our Discord community and following us on Twitter.