Sid Powell, co-founder and CEO of Maple Finance, says transparency has been a savior for decentralized finance (DeFi) amid a prolonged downturn in the cryptocurrency market.

Speaking to Cointelegraph on the sidelines of the Converge22 conference in San Francisco, Powell noted that throughout the winter, DeFi continued to operate as intended, while Central Finance (CeFi) became “completely inactive.”

Powell suggested that during the market crash, CeFi lenders were not “battle tested” and were “unwilling to liquidate clients” as they were focused on maintaining relationships with clients.

“When the bitcoin price went down, they didn’t want to send margin calls or email hundreds of customers because they wanted to maintain customer relationships,” Powell explained, adding:

“So you give them a little bit longer, a little bit longer — well, all of a sudden, a lot of these loans are underwater, especially the ones that started or [were] underfunded.”
He notes that in places where CeFi companies still lend, “they do so with a 1:1 collateral,” a much narrower market.

On the other hand, he clarified that “DeFi is more transparent”. In the over-collateralized DeFi models, “people were simply liquidated when BTC and ETH went down. It happened automatically.”

“In DeFi, you can’t allow the borrower to be half of the total loans because people see that and question risk management,” Powell said. “All loans are visible, so you had to be extra careful about who you signed and how you signed it.”

Powell also added that CeFi’s business was diverse in major trading and brokerage, which they felt was a strength, but that all of their lines of business influenced each other:

“But if a CeFi lender is running a pool on Maple, that pool won’t be affected by what happens on the business side of that business. […] and it’s limited and filtered to only lending activity.”

Related Topics: Decentralized Finance Faces Multiple Barriers to Universal Adoption

Maple is a decentralized financial lending platform that claims to own 50% of the institutional crypto lending market in terms of total outstanding loans and has issued nearly $1.8 billion in loans since its inception in May 2021.

Powell said Maple’s loan book has “seriously outperformed CeFi,” “there has only been one default of $10 million on $1.8 billion in loans and 900 [loans] outstanding to that date.”

Powell described Maple Finance as “a place where people can manage their credit pool,” but said the appetite for lending has waned since June, with lending rates rising from 8-9% to 10-13%, and thus cryptocurrency. Whale and yield aggregators are starting to shine the spotlight on lending platforms like Maple again.

Source: CoinTelegraph

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