Maple Finance co-founder and chief executive Sidney Powell told AAP on Friday that in 2021 and 2022, valuations and the "hype cycle" got ahead of the traction that crypto projects were experiencing with users.
A "decentralised finance" lending protocol for institutional borrowers built on the Ethereum and Solana blockchains, Maple got caught up in the collapse of the now-notorious crypto exchange FTX as well other cryptocurrency failures such as Genesis, Three Arrows Capital and BlockFi.
"It really prompted people to substantially reduce their counterparty risk appetite," Mr Powell said.
"So they pulled out of all the smart contracts, out of all lenders. Everybody just wanted to get back to cash as much as they could. They were really worried about contagion risk, from FTX and even before that."
One of Maple's borrowers, crypto hedge fund Orthogonal Trading, even defaulted on six loans worth a total of $US35 million ($A51 million) when it couldn't access its funds on FTX.
These days, Mr Powell says, the main metric that Maple uses to gauge its own success - total value locked (TVL) on its smart contracts - is up five times from where it was in March.
"Valuations haven't caught up, but they're starting to," he said, pointing to a recent uptick in Bitcoin, which this week surged to a 17-month high of over $US35,000 ($A55,000).
"The underlying fundamentals, like how many people are using this, what's the value locked in protocols, are starting to increase again."
Maple has also begun receiving some inbound interest from institutions interested in taking part in pilot programs, Mr Powell said.
The Maple platform offers secured lending where the collateral is stored with a custodian, in an attempt to avoid counterparty risk and the issues that led to the failures of several centralised crypto lenders last year.
Another product is real-world asset lending against the future value of tax credits, with $US21 million ($A33 million) lent so far.
Maple lends to an originator, Mr Powell explained, which in turn lends to smaller business.
"Let's say like a cafe is due a rebate from the US government, and this company that we fund will buy it off them at a discount, effectively. It does a cash advance against a payment to be received from the government."
It's also a high-yield, short-dated product, Mr Powell added.
Its third product are tokenised Treasury bills, which can move freely and near-instantly around the world because they are stored on a blockchain.
"It's going to be tremendously useful for the velocity of finance and commerce taking place," Mr Powell said.
"That mobility adds value."
The 33-year-old Adelaide native lives in Miami, and was in Sydney to visit relatives and speak at the Australian Financial Review's crypto summit last week before heading to Amsterdam on Saturday for a summit involving the Solana blockchain and its community.
A former NAB senior associate, Mr Powell runs Maple Finance with a team of 25 across North America and western Europe, many of whom he said come from an investment banking or traditional finance background.
"Ultimately, the thesis with Maple is pretty simple," Mr Powell said.
"Can we do it at lower cost because we have the ability to send electronically very easily on a blockchain and record all of the data around that lending in real time, in a way that you can't do if you're built on J.P. Morgan's infrastructure, which is now decades old."
16°C