Maple Finance CEO: Separating risk from lending saved DeFi from stock market crash
DeFi crypto lending has worked as expected during the crypto winter because transparency has kept it in line and business activity has been stovepiped, according to Sid Powell of Maple Finance.
Interview
Maple Finance Co-Founder and CEO Sid Powell Says Transparency Has Been the Saving Grace of Decentralized Finance (DeFi) Amid Prolonged Crypto Market Meltdown.
Speaking to Cointelegraph on the sidelines of the Converge22 conference in San Francisco, Powell noted that, throughout the crypto winter, DeFi has continued to operate as expected while centralized finance (CeFi) has become “ rather inactive".
Powell suggested that during the stock market crash, CeFi lenders were not properly "battle tested" and "prepared to liquidate customers", prioritizing maintaining customer relationships.
"As the price of Bitcoin fell, they didn't want to send margin call letters or send emails to hundreds of customers because they wanted to maintain relationships with their customers," explained Powell, adding:
"So you give them a little bit more time, a little bit more time - well, suddenly a lot of these loans are submarine, especially the ones that started or [were] undersecured ."
He notes that where CeFi companies still lend, "they do so on a 1:1 guarantee".
On the other hand, “DeFi is much more transparent,” he explained. In oversized DeFi models, “people just liquidated as BTC and ETH fell. It happened automatically."
"In DeFi, you can't get away with letting a borrower be half of a loan pool because people see it and question the risk management there," Powell said. "All the loans are visible, so you had to be much more careful about who you took out and how you took them out."
Powell also added that CeFi's business is diversified with trading and prime brokerage, which they believe is a strength, but all of their business lines influence each other:
"But if a CeFi lender managed a pool on Maple, that pool would not be affected by what happens in the commercial part of this company. [...] It is limited and compartmentalized to the sole activity of ready."
Related:
DeFi crypto lending has worked as expected during the crypto winter because transparency has kept it in line and business activity has been stovepiped, according to Sid Powell of Maple Finance.
Interview
Maple Finance Co-Founder and CEO Sid Powell Says Transparency Has Been the Saving Grace of Decentralized Finance (DeFi) Amid Prolonged Crypto Market Meltdown.
Speaking to Cointelegraph on the sidelines of the Converge22 conference in San Francisco, Powell noted that, throughout the crypto winter, DeFi has continued to operate as expected while centralized finance (CeFi) has become “ rather inactive".
Powell suggested that during the stock market crash, CeFi lenders were not properly "battle tested" and "prepared to liquidate customers", prioritizing maintaining customer relationships.
"As the price of Bitcoin fell, they didn't want to send margin call letters or send emails to hundreds of customers because they wanted to maintain relationships with their customers," explained Powell, adding:
"So you give them a little bit more time, a little bit more time - well, suddenly a lot of these loans are submarine, especially the ones that started or [were] undersecured ."
He notes that where CeFi companies still lend, "they do so on a 1:1 guarantee".
On the other hand, “DeFi is much more transparent,” he explained. In oversized DeFi models, “people just liquidated as BTC and ETH fell. It happened automatically."
"In DeFi, you can't get away with letting a borrower be half of a loan pool because people see it and question the risk management there," Powell said. "All the loans are visible, so you had to be much more careful about who you took out and how you took them out."
Powell also added that CeFi's business is diversified with trading and prime brokerage, which they believe is a strength, but all of their business lines influence each other:
"But if a CeFi lender managed a pool on Maple, that pool would not be affected by what happens in the commercial part of this company. [...] It is limited and compartmentalized to the sole activity of ready."
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