How to Earn Passive Income Via DeFi Lending: Maple Finance Exec

  • Quinn Thompson is the head of growth at Maple Finance, a decentralized lending platform. 
  • Maple Finance connects lenders and borrowers on its blockchain-powered capital marketplace.
  • Thompson explains why he’s ‘mega-bullish’ on the sector and how it could benefit stakeholders. 

Like many true believers in cryptocurrencies, Quinn Thompson bought the dip in bitcoin and ethereum when the coronavirus outbreak plunged global financial markets into chaos. 

He recalled buying bitcoin when it sank below $4,000 and ethereum at around $190 in March 2020.

As investors grappled with the implications of a rare pandemic, Thompson scooped up two of the best-performing assets over the past two years after pondering the unprecedented monetary policies enacted by the

Federal Reserve

to support markets and the economy. 

“Once the Fed announced that they were buying investment-grade corporate bonds, it was just the last straw to me,” he told Insider in an interview. “That signaled it’s only a matter of time before they are buying and supporting the equity markets.”

Not wanting to rely on the Fed put — the markets’ belief that the central bank would step in to support the markets at every big sell-off — Thompson bet both his portfolio and career on the rise of crypto as the alternative. 

After cold messaging about 10 crypto executives on LinkedIn, he got his foot in the door by parlaying his fixed income and credit underwriting experience in investment banking into a role overseeing the institutional lending book and yield generation strategy at Abra.

Thompson said he helped grow the assets under management on the platform, which allows investors to trade and earn interest on their crypto holdings, to $1.5 billion in January from $300 million in May 2021. 

For the better part of last year, almost every crypto sector experienced breakneck growth, but it was decentralized lending that made him “mega-bullish.” Soon, he jumped to DeFi lender Maple Finance (MPL) as the head of growth. 

How decentralized lending works 

Decentralized lending has been around for as long as decentralized finance. In fact, borrowing and lending protocols such as compound (COMP) played a key role in ushering in the “DeFi summer” boom of 2020. 

DeFi lending fills a big gap in the crypto industry because banks have historically shunned crypto borrowers in part due to the anonymity and lack of regulatory clarity associated with digital asset transactions. This lack of funding source means that crypto borrowers are willing to pay higher rates to secure cash.

DeFi lending platforms also allow borrowers to collateralize their digital assets to secure loans, bypassing the criteria for lengthy credit checks and onerous traditional collateral requirements. As a result, borrowers can access funding more easily, while lenders can earn decent interest from their loans. 

Thompson’s employer Maple Finance does just that. The firm aggregates capital from hundreds of lenders, who deposit their crypto into a diversified pool to earn interest denominated in the pool’s


asset. Borrowers go through a pool-specific underwriting process before receiving their loans, which are denominated in the USD stablecoin (USDC). The “pool delegates,” which refer to those who have been approved to manage the lending pools on Maple, are responsible for the underwriting, due diligence, and credit analysis.

So far, quant trading shop Alameda Research, crypto unicorn Amber Group, and venture capital firm Framework Ventures are among the 25 to 30 institutional borrowers on the platform. CoinShares and Dragonfly Capital are among the lenders on the platform. 

How DeFi lending could benefit stakeholders

DeFi lending allows investors to generate yields driven by “borrowing demand.” This is a more sustainable source of yield than yield farming because “it is derived from organic demand instead of token inflation,” Walter Teng, digital asset strategy associate at Fundstrat Global Advisors, said in a research note on Friday. 

“It’s a way for anybody with an ethereum wallet address to gain access to yields from Alameda or some of these other high-quality borrowers in crypto that are paying 8% to 9% rates of cost of capital because they don’t have access to the traditional 1% to 3% bank capital,” Thompson said. 

For crypto traders such as Alameda Research, the borrowed funding enables them to park the funds on exchanges so that they can arbitrage crypto prices among different venues without the latency of transferring funds in-between, he explained. 

Because Maple Finance allows for under-collateralized loans, it means that credit-worthy crypto businesses that may not have sufficient funding to meet traditional collateral requirements could secure the loans needed to fund their operations. Though to be sure, only businesses that have gone through rigorous due diligence and financial audits can access the capital, according to Thompson. 

Despite the increasing adoption of DeFi lenders, regulatory risks remain a key hurdle for lending protocols. In February, BlockFi, which also offers interest-bearing crypto accounts, agreed to pay $100 million to settle charges with the Securities and Exchange Commission for allegedly failing to properly register its services. 

By focusing on accredited institutional investors, Maple Finance has mitigated similar risks, though the SEC has stepped up its scrutiny over DeFi applications.

Thompson remains bullish over the long term. As more capital markets activities are done on-chain, he expects the firm to add traditional finance credit managers, crypto-native yield funds, and bitcoin mining lending capabilities. 

“We are targeting the more crypto-savvy businesses first,” he said. “Eventually, once the infrastructure is there for crypto, then everything will just be facilitated on-chain.”

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