Maple Finance is an institutional capital marketplace powered by blockchain technology. The protocol launched on the Ethereum mainnet in May 2021 and has since found product-market fit amongst crypto-native institutions needing access to capital to power their business operations.
We launched the protocol with our governance token MPL, an ERC-20 native token. The token has three roles: governance, providing Pool Cover, and sharing in network fees accrued to the Maple Treasury. The current circulating supply of MPL is 3,658,989, out of a maximum 10,000,000 and the original token distribution structure looks like; 30% Liquidity Mining; 25% Seed and Advisor; 26% Seed; 5% Public Sale, 14% Treasury.
Maple is committed to growth in 2022 and aims to reach $5bn in TVL by the end of the year by continuing to create products that serve customer needs and generating more value for the protocol and MPL holders.
This article proposes 5 ways to generate more value through improving the utility of MPL by ensuring the token is central to the use of the Maple protocol. Our north star is to improve MPL token utility whilst supporting the growth of the Maple protocol in the long-term, and in developing these solutions we’ve aimed to ensure three principles are upheld and ask for these to be referred back to as you dig deep into this proposal:
- MPL utility should bring value and growth to Maple protocol, while also encouraging MPL holders to participate in the MPL ecosystem
- MPL should participate in revenues of the platform but such participation should not be passive in order to incentivize active, long-term participation from token holders
- Utility must be durable and not reliant on short term MPL rewards mechanics
5 changes to tokenomics for improved MPL utility
1. Introduce xMPL and use establishment fees to buy back MPL and transfer to xMPL holders
The concept of compounding tokens was introduced by Sushi. Adopting this concept would introduce a way for MPL holders to participate in the establishment fees earned by the Maple DAO Treasury on the Ethereum protocol and ultimately from Solana, through committing pool cover.
We propose that holders commit MPL to a smart contract and receive xMPL in return.
Benefitting MPL holders because Maple will use establishment fees to buy back MPL and transfer it to holders of xMPL on a monthly basis. In more detail, the Maple DAO Treasury will receive 0.66% in annualized establishment fees (up from a flat 0.25% per loan under Loans V1), and as set through the governance process we propose to use ~50% of revenues to buy back MPL on the market and deposit to the xMPL pool. As a result, after they choose to commit the MPL to a smart contract and reap xMPL, holders of xMPL will compound their MPL balance through sharing the establishment fees generated by the Maple protocol.
2. Enable MPL to be deposited single-sided as Pool Cover
The xMPL token can then be deposited as Pool Cover to any of the Lending Pools on Maple Finance. Pool Cover provides a reserve to cover defaults in Lending Pools, and is liquidated when defaults occur. Providing Pool Cover earns depositors 10% of the interest earned by a Pool unless otherwise determined by the respective Pool Delegate.
Introducing single-sided cover means that holders of xMPL can deposit and receive a yield without incurring impermanent loss. Single-sided cover therefore increases the utility of MPL tokens in the Maple protocol and as a result xMPL holders will be aligned to the protocol long-term. Additionally, single-sided cover increases the incentive for MPL to be deposited as cover, thus reducing the circulating supply. Other assets such as USDC, wETH and wBTC could be added as other potential cover assets in addition to xMPL.
3. Provide interest rebate to borrowers who hold MPL
Borrowers who hold xMPL at an amount that exceeds a certain balance of their requested loan will be eligible to receive a rebate on their interest. This improvement delivers on the objective to provide utility in holding the MPL token for all, including Borrowers, making them stickier, long-term users of Maple.
4. Create a separate Solana token, SYRUP, as the most secure and non-dilutive method
With the launch of Maple onto Solana in Q1 2022, the two main token considerations are to deliver a safe and efficient deployment that minimizes dilution of MPL, and ensure benefits to existing MPL holders.
As demonstrated by recent events, bridging technology is still in its infancy and introduces known and unknown risks. As well as this, the implementation and testing of any new technology would add a minimum 6–9 months to deployment and still require users to pay gas fees on the transfer.
Launching, SYRUP, a second token on Solana is considered the most secure and non-dilutive method for initial launch and the lowest risk way to manage fees, security, Pool Cover, and liquidity mining.
As the first undercollateralized lending protocol to have a multi-chain presence, there are a number of unknowns but we are confident that having a self-contained token reduces the complexity of the Solana build and allows for faster iterations when issues arise. We are also confident that a second token is a more capital efficient solution to bridging, which in order to support liquidity mining on Solana would dilute MPL.
We would like to caveat that creating a new token for Solana does not mean a new token for each chain as it would be easier to replicate identical contracts on other EVM compatible chains and hence using the MPL token would be conceivably easier. Launching Maple on further chains is at least 6–12 months away and bridging technologies are likely to have improved by then, there will also be more data to base decisions on by that time.
Another caveat is that a separate token does not rule out potential future reunification of ‘SYRUP’ and MPL. In considering reunification we would need to see bridging technology improved, there be more ecosystem overlap and the two Maple protocols reaching parity.
5. Grow the Maple Treasury as the largest holder of ‘SYRUP’
The principal consideration for the Maple-Solana tokenomics is that MPL holders on Ethereum benefit and are aligned to its growth.
The conceptual framework is that the Maple DAO Treasury would hold 40% of ‘SYRUP’ tokens, which it would then deposit to collect 40% of the establishment and ongoing fees. These would flow to the xMPL pool for buy backs so that those holding xMPL benefit directly.
- Maple DAO Treasury on Ethereum: 40%. This is the largest allocation, to be held on behalf of all MPL holders on Ethereum. The Maple DAO will deposit ‘SYRUP’ tokens and collect 40% of the fees generated and pass these through to xMPL via a buy back of MPL. This route is preferred to an airdrop because the ‘SYRUP’ token can remain private and unlisted for longer.
- The Maple Solana Treasury: 30%. This allocation can be used for liquidity mining, strategic token swaps with other protocols and OTC sales to strategic partners. Providing more flexibility for later funding or treasury diversification.
- Core team, advisors and acquisition: 30%. This allocation can be used to cover acquisition costs, hiring additional world-class team members including Solana-specific developers and advisors, and aligning existing Maple team members.
In regards to timing, the ‘SYRUP’ token will be launched approximately 3–6 months after the Maple Solana protocol launches. The idea is to keep ‘SYRUP’ private for as long as possible so that liquidity mining and any strategic OTC sales are not impacted by market volatility.
MPL utility will be enhanced and made central to the use of the Maple protocol through combined techniques, including:
- Using the establishment fee to buyback MPL and transfer it to holders of staked MPL (xMPL);
- Enabling MPL to be deposited single-sided as Pool Cover to receive fees without risking Impermanent Loss;
- Interest rebate to Borrowers who hold MPL;
- A separate Solana token, SYRUP, is the most secure and non-dilutive method for initial launch;
- MPL holders will directly benefit from Maple on Solana as the Ethereum Maple DAO will be the largest holder of ‘SYRUP’, with generated fees used to buyback MPL for xMPL holders.