It is known that cryptocurrencies had been designed not only to be an alternative to the traditional financial system but also to be a potential path to completely replace it somewhere in the future. As this market evolves, and especially after the revolution brought by DeFi, new projects lay new foundations for these possibilities, which were seen as “utopia” before. Maple is a platform focused on crypto-based bonds, which already has made a definite impact on the blockchain scene.
How Does Maple Work?
Maple is a decentralized application where users can both create or invest in crypto-backed bonds, called “SmartBonds”.
The platform is a pioneer on this crypto bond solution niche, being designed to use revenue-producing crypto assets instead of cash as security.
It basically works a two-sided marketplace for two kinds of users, meant to fit supply and demand purposes. “Supply” users are issuers who create the bonds to borrow money and “demand” users are investors who buy the bonds to earn interest with it.
There is no native token within the platform, as the SmartBonds represent the crypto bonds sold by the issuers and bought by investors. Maple uses DAI to pay interest earned by investors once the crypto bonds mature.
Understanding the Process
SmartBonds are ER20 tokens, which are paid by users using DAI. They are 100% collateralized by interest-earning crypto assets.
All interests earned within the platform are paid in DAI, as there is no native token required for such necessities.
As the use of DAI suggests, the platform is integrated with Compound Protocol, but plans are for the integration of multiple DeFi platforms under the same “roof”, to make users capable to connect with the entire cryptocurrency capital market.
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Anyone who has a savings account on Compound can issue bonds using Maple, as the platform uses cDAI as the collateral which secures crypto bonds issued within the system.
If a user starts lending on Compound, he will receive cDai and begin to earn interest automatically. Through Maple is possible for users to stake these same cDAI “gains” as collateral to secure crypto bonds that are sold to investors.
Dig Into It
The SmartBonds have fixed-term and liquidations that are not enforced before the maturity date. The structure of the SmartBonds itself protects investors’ positions, so the enforcement process can fulfill its main goal.
An interesting concern here is how interest rates are set within the platform. The interest rates on the SmartBonds are set by issuers automatically when they create these bonds.
The platform is decentralized, so the market forces are the main responsible for balancing the supply and demand interest rates.
Another factor some may question is when the interest is finally paid to investors by issuers.
SmartBonds accumulate interest since Activation to the Maturity date, so interest is fully paid to investors when the Maturity date finally comes.
When cDAI collateral is withdrawn from Compound in the Maturity date, the smart contracts collect interest and so the cycle can be sustained.
Fees do not exist on Maple, as the product still running a Beta version of the platform. The team may have plans to use long term monetization, but it is just planning.
Why is Maple So Interesting to DeFi Users?
Bond markets empower the traditional financial system, so Maple wants to empower the DeFi universe similarly.
First, users can speculate on interest rates. While collateral earns floating interest, Smartbonds still pay fixed interest. If the user thinks the Compound rate will rise, he just needs to issue bonds to increase his profits.
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If the user thinks Compound rates will drop, he can buy SmartBonds to lock into a fixed rate to solve his problem.
There are other interesting features to users that want to borrow/lend assets as well, like the possibility to borrow against their Compound supply to reinvest in other platforms like Uniswap and Nuo, for example, as a way to diversify investments.
Maple wants to empower the DeFi world, being a pioneer by creating a solution for the crypto bonds niche.
It works as a decentralized platform for financial applications, allowing users to both issue and invest in bonds backed by cryptocurrency-based assets.
The platform integrates with Compound, using DAI and cDai as payment means. The platform does not have a native token and also does not have any fees involved through processes.