Maple Finance and institutional DeFi lending

Transcript

The people who are building at the moment and who are kind of ignoring the negative sentiment and and the uh dissatisfaction around prices are going to win when we have you know this uh this resurgence and hit the kind of hit the tipping point on the S-curve where we you know where we go exponentially. >> The entire financial world is moving onchain but what does that mean? What does it look like? And how does onchain finance and asset management work in actual practice? What do these terms mean? Hello and welcome to the Milk Road Show, the podcast that knows that some syrup goes on pancakes and some goes in your crypto wallet. But if you get the two mixed up, you're going to have a sticky situation. I'm your host, John Gillan. Today is Tuesday, July 21st, and today we are joined by Sid Powell. Sid

is the co-founder and CEO of Maple Finance, founded in 2019 to bring institutional-grade credit infrastructure on chain. With over $4.5 billion dollars in AUM, Sid is helping to lead Maple and their syrup token to new and impressive innovations in the world of onchain asset management. Sid is going to pour a lot of syrupy alpha on this conversation in this episode. I'm really excited for this one. So, if that sounds good to you, make sure you like and subscribe. Share this episode with somebody who's going to enjoy it. Today's episode is brought to you by Securitize, the regulated rails for tokenization and BitGet stocks 2.0 with real liquidity, real dividends. And without further ado, welcome back to the Milk Road Show, Sid Pal. How are you?

>> Hey, John. I'm going well. Glad to uh glad to be here again. It's been a while. >> I'm glad to have you back. I think there's a lot about a lot of things to talk about today. Um but I wanted to start the conversation with something I think you have a front row seat to, which is this gulf between institutional bull market and adoption of of crypto and digital assets and retail sentiment and bare market prices being an all-time low. Can you talk about what that experience has been like from your perspective and and what you're seeing happening there? >> Yeah, for sure. It's uh you know, it's it's an inverse to what we've seen in kind of past markets where 2021 2022 it kind of felt like there was uh all-time high euphoria but but maybe not as much in the way of traction. I think today uh

you know from from my seat working in the the institutional DeFi space I think traction is actually fantastic. You can see it in some of the partnerships that have come out whether it's you know Robin Hood released their earn program which uses uh DeFi rails on the back end which we can talk about a little bit more soon. Uh you've seen JP Morgan is tokenizing. You know Jamie Diamond was famously not the biggest fan of crypto but here they are launching tokenized money market funds and settling things on chain. And then of course stable coin adoption is at an all-time high. So you know I uh I think about it in in terms of this kind of paradigm of you had Kota Perez you know had sort of famously talked about uh the you know cycle of

technology revolutions where you have an initial hype cycle and maybe the uh the valuation of uh of startups and and capital entering the space is quite high and and exceeds uh adoption and then you have this kind of crash phase which I think you know we we would all acknowledge we had around the end of 2022 and into 2023. three and then you start to see the the deployment phase. We have real adoption. So bulge bracket banks launching tokenized products, the largest asset managers in the world talking about tokenization. So is Larry Frink at Black Rockck, Apollo and uh and prices are are lagging that level of adoption. I would say that's where we are today. So I think uh from

from my inside seat I think traction is very good and I think you know prices on the retail side will eventually come to catch up with the level of adoption that we're seeing but you know there's a lot of other things taking people's attention. You've had SpaceX IPO, you have uh, you know, Anthropic, Open AAI, both poised to uh, to IPO. And then you've had a lot of hype around semiconductors. And I think that just, you know, that distracts the average investor and has drawn a lot of attention away from from the real, you know, fundamental progress being made in the crypto and blockchain side. >> Hi everyone, this is John. Listen, our Milk Road Pro analysts nailed this AI bull market. They had dozens of calls pay off in a big way for our community.

If you want to see how our entire team of analysts are positioning for the crypto bull market that's going to come after this bare market finally ends, you can join us now at Milkroad Pro. It's just a dollar. Link is in the description. You'll get access to all of our analyst trades, their watch list, and see how they're navigating this in their portfolios and get access to ask us questions in Discord anytime, day or night. It's just a dollar. Link's in the description. Milk Road Pro. Join now. I'll see you there. Yeah. So, on these fundamentals, in a market that everyone is calling a bare market, Maples loans are at an all-time high. I checked today. It's it's 1.75 billion in in loans. Demand seems to be going up, not down. Uh, and I want to know why you think this is happening in a bare market

and why is so much capital coming to Maple as opposed to one of the many other places they can go for yield on chain. What are your thoughts on this? >> I think there's a few reasons. So, we, you know, as as as you mentioned, John, we are at, you know, close to an all-time high in terms of loans outstanding on Maple. We have around 4.6 6 billion AUM loans have been close to 2 billion outstanding and uh I would say a couple things drive it. So one, while the overall crypto sector is very cyclical, you know, it has ups and downs, I think the yield sector is a little bit counteryclical in that when Bitcoin is not pushing all-time highs, folks start to wonder, how do I put my stable coins to work? How do I get a yield on my on my uh on my stable coins

where I don't have much risk of uh you know, of downside movement in prices. And so they rotate out of holding assets themselves and and and they start to look for a yield. And that's where Maple has really stood out. You know, over the first half of this year, our yield products outperformed the peers in DeFi about 110 basis points or or 1.1% on average. So, you know, if you look, you're getting mid threes on T bills. You're getting around that maybe into like uh you know, high 3s on a lot of DeFi yield products. And then Maple has been offering, you know, high fours up to sort of around 5%. So, I think that was attracting a lot of people. It's why we saw strong deposit inflows this year and why, you know, why why you've seen a

lot of uh, you know, newer firms kind of partner with us and and offer the uh, you know, offer our DeFi yield products to their customers. So, I think that's I I think that's been a major driver. We continue to see stable coin adoption uh, be very strong as well. You know, it's it's around 300 billion. And for us, stable coins are kind of like the oxygen. It's we do all of our loans in stable coins. we raise our capital to lend out in stable coins. And so I think you know the the resilience of stable coin market cap relative to the price of Bitcoin starting the year at around 100k around 100k and being you know closer to the low 60s today uh you know has has driven a lot of that traction that we've seen. Could you differentiate for me

some of Maple's positioning and products from other players in the market like an A or a Sky or a Morpho just because I think it would benefit our audience to just understand a little bit of the niche that you guys sit in and and how you're differentiated from those other products. >> Yeah, it's good to uh you know it's good to to compare our offering to theirs. I think what I would say is uh while there are many other offerings in DeFi, there's actually only a few large ones that have a decent enough track record and where folks are kind of confident uh in one them not getting hacked and and suffering loss that way. And also, you know, also two, the kind of the durability and the stability of the yield. You know, we're kind of gone from the days where you're going to go when

you're going to go and farm a 20% APY food coin. Now you're kind of looking for for much more stability and and you know uh an understanding of of where the yield comes from. So just to compare Maple, so our core business has been overcolateralized lending with large cap crypto assets as the collateral. So we do a lot of loans against Bitcoin, ETH, Salana, XRP. In our case, we're pretty much exclusively lending to institutional borrowers. So, uh, prime broker, an asset manager, an exchange, a large family office. These guys are borrowing anywhere from 10 million up to 500 million loan sizes. So, it's not retail lending. And they'll usually post collateral to a qualified custodian. So,

they don't want to stick their collateral in a smart contract where it's exposed to a hack or an oracle risk or price manipulation of some kind. So that's been our core differentiator and kind of where we sit in in or how we've carved out a niche for ourselves. One, it means that we can charge a little bit more. It means that we we are a little bit less exposed to smart contract risk than than some of our peers. And so that niche uh and and you know having legal agreements kind of backing the loans, that's been the niche that we've carved out and it's why we're able to charge a little bit more for our loans and therefore why our yield is higher. And that means that we're able to partner with DeFi protocols like Ave and like Morpho where we can have our syrup USD

so that the the DeFi LP tokens of our products uh supported as collateral and then it's also uh why we can serve as a backing asset for other uh what I would say maybe more stable coin or yield products like Sky or Athena that are out there. So that you know these players work with us and include Maple assets as a form of backing that helps them generate yield so they can pay yield to their customers and and support the asset balance of their own stable coins. So we try and kind of navigate this uh or or tread this path of being a little bit neutral and kind of working with everyone in the DeFi space. So, I think that framing is helpful, but I think it kind of poses a natural question of do you see all of these different players

as either partners or as competitors or some of both? And like, you know, here at Milk Road, we've been very focused on the Sky ecosystem and what they're building there. So, maybe take them as just like one example. Are they a peer, a competitor, a partner? How do you think about those relationships? >> I I think each of them is is a little bit of both. I think you'd have to be naive to kind of look at at all of these players and say they they are only partners and and there's no competitive angle, but I think you're also losing the forest for the trees when you say they're only competitors and there's not a way for us to work together. I think you know the the the the savvy operator and and and the you know the team that's thinking for the long term tries to kind

of work tries to find ways to partner with people who would otherwise be competitors. So if we look at Sky for example, uh they've you know they've they've allocated to us. Um so in that sense there's a partnership and so we've worked with each of their uh stars. So they have Spark, they have OEX, they have Grove, we we you know we have great relationships with each of these teams. Those teams can both allocate to Maple and then they can also go out and do their own lending. So in that sense there is a somewhat competitive angle but you can see that we're actually at the same time working with them as partners. Um where we naturally fit in and kind of work symbiotically with uh the Sky uh ecosystem is that Maple's syrup USD assets the syrup USDC syrup

USDT can serve as uh one of the backing assets and yield sources for uh USDS and SUSDS when when they pay out a yield that will come from a mix of real world assets, crypto lending, institutional lending and we slot into one of those buckets. So we are in fact you know one of the allocations that helps generate the yield that supports that ecosystem and helps it grow. So um you know that's uh that's just one example but you can see there's there's always both a competitive angle and and a complimentary partnership angle and naturally we always try and steer towards the the partnership angle.

>> I interviewed Joe Shalom who's the CEO of Sharlink one of the largest digital asset treasury companies for Ethereum and he used this concept of coopetition of I think it's good. Yeah. [snorts] Yeah. And I think that kind of gets to what you're saying there, too. So, it sounds familiar, and I appreciate that perspective. I want to talk about another partnership that uh Maple has has had here. Uh Robin Hood chain launched on July 1st. Maple launched a product called Syrup USDG to help power the Robin Hood earn product. And I wonder if you could just tell us a little bit about this partnership, this product, and and what's your what you're excited about here. Yes. So I mean uh obviously we we were very excited to be part of uh of the Robin Hood chain launch and and Robin Hood earn product.

I mean Robin Hood is obviously a behemoth within the fintech space. They have over 350 billion of assets. They have over 30 million customer accounts. Uh so we think this is going to be a phenomenal success. Maple is one of the the DeFi partners who are working behind the scenes to make the the earn product work. So when a Robin Hood customer logs onto the app, they you know they see Robin Hood earn they have the option to to earn a yield and that yield comes from a composite of sources. So it's using a morpho vault and then the morpho vault can allocate to certain assets or accept certain assets as collateral to lend against. So you have uh you know other D5 blue chips like Athena in there uh Grove or Stakehouse are one of the

curators. So it's very much a uh you know a team effort to kind of bring this together but we launched syrup USDG which is one of the assets uh eligible for that vault and so uh you know we are one of the uh one of the sources of yield that ultimately goes to the to the Robin Hood earned customers. So I think for us the really exciting aspects are uh obviously one you know distribution having a great partnership but we think this is a really exciting way to get new uh money and users into the DeFi ecosystem because if you'd look I' I'd say uh it's been relatively flat the last couple of years and we're looking now for where is the marginal user for DeFi. Is it somebody who actively has to

manage their wallets and connect to the protocols or and this is where I think the puck is going. Is it a seamless user experience where to to a certain extent you don't kind of know it's not telegraphed that it's DeFi on the back end but you get this seamless experience where you're earning yield your dollars are portable and you know and the yield starts coming through instantly in the same way that we're used to seeing uh where it comes through block by block on chain. So I think you know we are going to over time close the gap between DeFi and FinTech and and what I would call web 2 finance and uh you know and I think this is a really exciting partnership that uh that illustrates that and for us you know we got to launch syrup USDG so our third uh stable

coin yield product and you know we we think the USDG consortium is uh is great and uh you know ultimately we are kind of stable agnostic to which particular stable coin we use. We we actually just want to see all stable coins uh grow in adoption and usage. >> Your co-founder at Maple, Joe Flanigan, said that he believes the most critical thing for Maple to push for right now is the growth of onchain capital markets. And I'm curious what that looks like for you all because I think you know looking at this Robin Hood partnership and as an example, you could say that it's launching new products like the syrup USDG is a new product, right? But you could also say it's expanding access to what you're already doing. Uh and sometimes maybe it's both. What's your

focus on that in terms of growing the onchain capital markets? Is it trying to expand access? Is it trying to launch new partnerships? What does that look like for you? What's the focus for you? >> I think it's both. Uh, you know, it's kind of a tright answer to say, you know, you pick A or B. Well, I choose both. Uh, but let me let me let me let me explain that a little bit. Uh, so, uh, you know, Joe and I both come from capital markets backgrounds. And so, over time, our thesis has been that more and more capital markets activity will happen on chain. What does it actually mean? It means you're going to see uh loans and settlements and financial transactions increasingly take place in stable coins. You're going to see the assets that are being transacted uh increasingly tokenized uh and uh you're going to see more I

think more direct distribution to customers. So in this case, you know, that is the Robin Hood customer directly going into uh into um yield products uh that uh connect to DeFi. And uh the other thing I should say is that you're going to see more of a longer tale of of assets come on chain. I think that is part of the whole you know cost reduction we're talking about here. So with that thesis in mind we've tried to focus on you know what moves the puck forward for us and ultimately kind of what are the mega trends we can attach to that will benefit Maple and and uh you know and and our mission of of uh you know funding innovative companies on chain. So I think broadly stable coin adoption helps. So having a new uh product syrup USDG denominated in stable

coins were doing loans in USDG is helpful and having a portal for regular fintech consumers who previously didn't know they were using stable coins to now seamlessly access stable coins. you know, they think uh they can log in, see a button that says fund my account and earn yield, and all of the uh mechanics and kind of operational friction of having to swap from fiat into a stable coin or select your stable coin and approve transactions is actually abstracted on the back end. I think that's ultimately what people have been citing as one of the major uh blockers and impediments to adoption of DeFi and and crypto. uh and you know and and in

this case we're seeing it removed. >> Yeah. And I think that the success that Robin Hood has had with Robin Hood chain and their you know they're famous for their US UX experience. Um I think this is going to be something we're going to see a lot of other players you know following their lead modeling this and and maybe some more things coming out in the space. Do you think that this like DeFi mullet this vaults model is something we're going to see copied across you know incumbents and and newcomers? Uh and and what do you think that looks like as we start to see more and more people start to offer versions of this in the marketplace?

>> Yeah, I do. I think uh look, I I think vaults have have found product market fit. You know, we we we at Maple actually pioneered a form of vaults uh back in 2021. So when we first launched, we had the concept of the lending pools. Each lending pool would have its own, we called it a pool delegate who was managing it, but essentially that was kind of the same role as what you see commonly referred to as a curator today. So uh had the uh had the naming wrong but the kind of the concept stuck and so it's taken a while to uh achieve broad adoption I would say but one I I think the reason it's found fit today is one it's very scalable and two it obviously presents a great opportunity for tradition traditional asset managers to

come in and run their own vaults. So you've seen Bitwise, uh, Galaxy, Winter Mute. These are all names who previously were not doing vault curation, uh, who had other business lines who have now come in and said, you know, we're going to offer vaults. We want to curate them. And so I think I think more traditional asset managers, whether it's private credit players or traditional banks or other asset managers, are going to look at this and decide to come in and do their own vaults. So I think you'll expect to see more of it. Uh what I'm looking forward to is I think the next step is seeing transactions actually originated on chain. So that equity investment that a private equity fund does. If you have a private equity vault curator, I look forward to seeing them settle the actual equity investment or

do the takeover or do the M&A activity in stable coins directly from the vault. That's what Maple does today. So we do institutional lending where we curate our own vaults and then we settle the loans with institutions directly from our vault in stable coin. So we're already doing that in the private credit sense. I think we're a little bit ahead of the rest of the ecosystem in that respect. But I think looking forward 5 years from now, you'll see private equity vault managers, you'll see uh you know uh macro pod shops running their own vaults and settling their transactions directly from the vaults.

And also you you got to understand as well it gives you much more flexibility as to what you invest in because you can settle any of these assets in a tokenized form uh and uh and uh you know fund the investments directly in stable coins. So it's very different to kind of the the architecture and the plumbing that needs to work in Tradfire to make that happen. Real world assets like funds, treasuries, and private credit are still running on rails built decades ago. Gated, paperwork heavy, slow to settle. Everyone's talking about tokenizing them, but far fewer can actually do it and do it without cutting regulatory corners. Securitize can. It's the SEC regulated infrastructure bringing real world assets on chain. 9 years in native tokenization not wrapped, backed by Black Rockck, Morgan

Stanley, and Kathy Woods Arch Invest, and chosen by the New York Stock Exchange, Van, BNY, and Apollo to do it at scale. It's the regulated bridge between traditional finance and crypto. Tokenize the world at milkroad.com/securitize. >> Everyone's tokenizing stocks these days, but almost nobody's doing it right. Thin liquidity, prices that drift from the real thing, dividends that just vanish. Bit stocks 2.0 is different. Real NASDAQ and New York Stock Exchange depth through licensed brokers, prices mapped one to one, dividends paid to your account in real time. Plus, you get the lowest fees in the market at just 0.04%.

And you can trade them like any other crypto as margin in earn in grid trading. Tokenized stocks finally done right. Head to milkro.com/bitgget to get started. >> You guys have always been a little bit ahead of the ecosystem, Sid. That's why it's so much fun to watch what Maple's been building. Um I want to pivot a little bit and talk about the syrup token because every well not every but most things in the digital asset space have their own digital asset. Uh but they all manage them and treat them a little bit differently. I think Maple has been very innovative about uh syrup and and that token. Um I wonder if you could just walk us through a little bit about how protocol revenue from Maple's activities flows to syrup today because I know there's been some recent changes and I want to get into those but just

talk us through this the token syrup, how it fits into Maple's um business and how that business drives revenue and value to the token. Yeah, I'll try and I'll try and simplify it so I don't bore everyone with with kind of legal jargon, but >> there's a there's a lot of details in this. So, [laughter] good luck. >> So, the uh the first thing to note is we don't have an equity structure. So, we never raised equity or raised venture capital into an equity entity and then issued the token out of that entity or or gave that entity a bunch of tokens.

Uh so we're we're different from uh most other protocols and crypto teams out there I would say. But the benefit that gives us is there's no conflict. So you don't have equity holders on a on a on an equity cap table saying we have first dibs on the revenue as you kind of saw recently with uh you know with Venice and uh and so with that conflict not there we just have the token at the center of the ecosystem. So we have a Cayman Foundation which owns subsidiaries that do institutional lending. So those subsidiaries lend out stable coins from from the vaults and then they receive interest back. They pass most of the interest onto the LPs

who are in Syrig. uh but they keep a small portion of the interest as revenue and that means that you know it's then wholly owned uh or that subsidiary is wholly owned by the Cayman Foundation and then the Cayman Foundation also has the subsidiary that issues the token. So it's actually all housed then within the one um you know the one corporate structure and uh just to address the only other missing piece uh the IP is then housed in a Gernzi trust uh and is the sole beneficiary and and the Cayman Foundation is the sole beneficiary of that. So we now have the IP, the revenues and the token issuance is all

housed within the singular corporate structure uh of which there is there is no you know there is no equity cap table. Uh so all we have then is syrup. So when a lot of people say well like what's the utility of the syrup token I would say well there you having separate utility is kind of more necessary where you have an equity structure over here and you're trying to justify the existence of the token. Here we don't have an equity structure. So the token is the only way you can participate in the uh in the ecosystem and therefore you know de facto the revenue is uh is tied up in the same ecosystem as as which the uh the token is.

>> Very helpful explanation that was very thorough. You did a great job. Uh on July 13th there was a governance proposal passed and it introduced revenue linked token buybacks. Uh I would really love to hear you try to explain for our audience how this rulesbased buyback program works for the syrup token and and what this governance proposal change does for the tokconomics here. >> Yeah. So we it's worth taking a step back and kind of looking back a few months ago. So a few months ago we had a proposal that passed which was we were going to take 25% of revenues and allocate it to the syrup strategic fund or SSF. And there it could either be used for buybacks or it could be held as stable coins or as bitcoin or other

liquid assets. But it was going to then benefit the growth of the protocol, help provide liquidity and and be this kind of strategic reserve. Uh the feedback we got was that token holders wanted to see more allocated towards buybacks uh as opposed to reinvesting in the growth of the protocol. uh you always have a tension as a startup in that you're growing and theoretically in almost all instances the actual best use of capital is to reinvest in the growth of your business. I subscribe to that. I think we've actually done a really good job of growing the business by just reinvesting capital in it. And uh however there's a tension where we also want to listen to the community and we we want to show

that uh you know that we take their feedback on board and we take it seriously. So where we've got to was with MYIP or Maple Improvement proposal 21, we've uh tied revenues to token buybacks. So you will have where where monthly revenue is below $1.5 million, we would do 10% goes towards buying back the token on a monthly basis. Where the monthly revenue is between 1 and a.5 and 2 million, we would do 20%. And then where uh monthly revenue is above uh 22 2 million uh we would do 30%.

And so uh what it gives us is some flexibility. We're not allocated to a fixed budget buying back the token which you don't want to do if revenue is low because you don't want to I mean think of that as a company that is kind of paying out more dividends when it's in a business slump. It just doesn't make sense. the only way all startups go out of business at the end of the day is by running out of money. So, uh I think you want to be thoughtful about balance sheet and treasury management. And so that's why we've done that. Uh but it now gives people a predictable way to say okay when business is going good token token buybacks will be up. The team has listened and they can kind of plot well if we think revenues are going to 50 mil annualized this year and then further

growing in years 2, three and four. Uh here we have a rough idea of what will happen with uh with buybacks. So it gives people predictability, certainty, it takes our discretion out of it. So we think we think this is a nice uh we think this is a nice middle ground that keeps the token holder uh allows the token holders to see the clearer participation between uh Maple's revenue the growth of our business and uh and value acral um through buybacks uh whilst at the same time giving us flexibility and balance sheet management so that we can survive uh downturns and so that we can still build up a reserve and invest in the growth of the business. I know that was really longwinded, but hopefully it covers everything.

>> No, it's very helpful. Yeah, and I think it's it's a crazy ambition to not to want to not run out of money, but I'm glad that that's a priority, too. >> Totally new for the space. >> Yeah, right. It's a revolutionary concept in digital assets. What do you do with the syrup tokens that you buy back? >> Uh they go into the syrup they go into the uh the SSF, so the syrup strategic uh fund reserve. And you have uh you have a couple of options. So, you can either buy them back and burn them. This is what a lot of people would want. Uh however, you can also buy them back and keep them for either a rainy day or for partnerships or for you know other growth users uses or for capital raising in future. I understand that buying them back and burning them is maybe a pure uh

form of buyback mechanism because you just buy back the tokens, you retire them from circulation. However, uh I think taking these tokens out of active circulation and if the one kind of encourages you to buy them back at a low and uh you know helps the the protocol treasury benefit from buying back tokens when revenue is good and valuations are low. uh so you know if the tok if the treasury buys back tokens at you know 12 cents and then six months later they're at 20 cents while the protocol treasury has captured that it's not being captured by any individuals um so ultimately in my view it you know it does benefit the uh the token holder

community and the other thing you can always do is you can always then hold a governance vote to burn a portion of those tokens if you want some or or all of them but yeah I don't think you need to uh I don't think you need to limit your optionality by just burning them as soon as they're repurchased. >> I think that the name of strategic fund is appropriate for this reason, right? Like you guys are trying to be thoughtful about all the different aspects of this process and I think that's it stands out and it's appreciated. Um you you spoke about this a little bit already, but I want to kind of have you unpack this for us. Maple has been deliberately built with everything around the single token of syrup. There's no equity stack like you said. Um, but how does this shape the

behavior, the decision-making of Maple? And just talk to me about how you think about Maple and its relationship to syrup and and how that drives a lot of the business practices at Maple Finance. >> I think it forces more discipline in how you think about using the token because you're not when you have when you have uh like an an equity cap table that is uh legally superior to the token portion of your capital structure. um one it forces you to prioritize the interests of equity holders. So you you know you saw that in for example the the Axelar acquisition last year right the equity the labs entity got purchased the token holders got nothing and you can't if you have uh if you collapse this and just

have the token holder structure you you you uh you can't have that you're not going to you don't have a fiduciary obligation to put a separate class of people first so I think it encourages more long-term thinking uh one it also just aligns our interest so I hold the token team holds the token uh any you know VC who has wanted to participate holds the token retail uh token there's retail token holders out there but effectively our interests are aligned uh because we're all in in in the uh the singular uh class of the of the capital structure which is the token uh thirdly uh I would say the way I think about tokens is maybe a little bit more akin to you know uh back when I was investing in in stocks and and when I

was in uh debt capital markets. Uh, but I, you know, I'm personally more focused on what I would call earnings per token or ultimately the cash flows that are attributable to any individual token. So, if you issue, you know, if if you grow uh revenues by 100%, but you also increase the token count 100%. Then cash flow per token is is kind of the same. Ultimately, what you want to do is you want to grow the the cash flows of the business and the protocol uh while keeping the token, you know, the token count either the same or ideally reduced. And I think that's where buybacks become great over time.

And Charlie Munger talks about this. If you have a business that durably produces cash flows and you can retire uh the shares or in this case tokens, then you'll increase the uh the cash flow, the free cash flow per token over time. And I think that's that's kind of the ultimate goal. And I think that's ultimately what all tokens should be valued on is is some kind of discounted future cash flow analysis. Uh so the way I look at it is if in future we could issue tokens in such a way that produced a uh a more than commensurate growth in revenues or free cash flow that would be worthwhile doing. Um uh however if we can uh ultimately the northstar has to be uh how much can we

grow cash flows uh you know kind of per token and I think you know I think most crypto founders should kind of look at things that way. I see a number of them treating tokens like funny money and just spending them proflegately uh and uh and I you know I don't think that's the right uh the right thing to do by token holders. >> I I really appreciate you unpacking this because I think that there is a lot of conversation around this. right now. Um, and so I'm I'm glad to have your perspective on this. Um, I I do want to just, you know, unpack a little bit more about the long-term value here and, you know, beyond the buyback program, how does things like growing Maples AUM, increasing the revenue or even these new partnerships and new products like Syrup USDG and the Robin Hood chain

partnership, how does that drive that long-term value to Syrup and and how do you see that progressing as Maple continues to grow? am unfortunately unable to talk about the the future valuation of of uh of Syrup but what I can talk about is uh the you know the growth of the of the overall business and and kind of how that how that drives bottom line for the uh for the overall protocol and can talk about principles. So let me at at its heart, Maple does lending. So more AUM means more capital to lend out. When the loans u when our loans outstanding grows, uh we're able to charge more interest and the interest that flows through. As I said before, we pay a lot of the interest back to to LPs and participants in um in syrup USDC,

Syrup USCT and Syrup USDG and the permission pool and that helps grow our AUM but we keep a portion of that as revenue. So over overall as AUM grows and loans outstanding grow the revenue to the protocol grows and that means we can do more uh spend more on buybacks of the token and ultimately there is there is no other you know there's no other equity equity with a claim on those revenues. So uh you know that means that the overall Maple ecosystem is more profitable. we can spend more on buybacks and I would say you know there there's more revenues and economics then flowing to uh flowing to token holders.

uh new products. You know, we we just launched syrup USDG. We think this is going to be huge. We we you know, we're very excited about the Robin Hood partnership, but as we launch more products, it allows us to attract more AUM and get more uh uh more net interest margin revenue. And so that's also accreative to the underlying economics uh within within Maple. And some of the products we're excited about launching are, you know, the participation, the partnership with Robin Hood chain and Robin Hood earn is this example of kind of what we call maple and bet, but effectively it's like how do we distribute the yield products, the DeFi mullet to fintex and neo banks, which we

think over time uh will want to offer more stable coin products to their users. They've all over the last 12 months started offering crypto trading. The next thing after you have crypto trading is well, I've got to give I've got to give my users and my customers a reason to keep stable coin balances on my platform and so I need to offer them a yield so they have something to do when they're not trading. And so we think that's going to be uh that's going to be tremendously accreative to our aumumumumumumumumumumumumumumumumumumumum our revenues and ultimately benefit the the token holders and syrup holders at the end of the day. >> I really appreciate those thoughts Sid and thank you for tiptoeing around my dangerous question there. Uh, I want to end with sort of your broader thoughts on the digital asset space. You know, it

looks like the Clarity Act might finally pass here. Um, we'll see if it does or not, but it's it's something that seems to be a bit of surprise and looks like the the clouds are parting there and it might happen. The Bitcoin bare market seems to be near a bottom here. You know, we're looking at the second half of 2026 and you you've talked a bit about this, you know, demand for lending on Maple has never been stronger. The institutional bull run has never been stronger. What are you hoping to see in terms of like the second half of 2026 from the digital asset class and the industry overall? >> Less capitulation. No, that's uh that's maybe too too simplistic an answer, but uh uh I uh you know I think I think it's it's kind of funny and highlights the the volatility we have within the space.

Yesterday the odds of clarity passing were down below 30%. Now we're up closer to 50% as of the last hour. And uh I think at the you know where we are at the moment as a sector as as I as we discussed at the start John I think traction is actually really good at the moment and you're seeing a lot of momentum behind crypto but the level of capitulation I see on my timeline among people I've known in the sector for years is you know is is higher than it's ever been. And I think if you look at the people who are now doing extremely well within AI, it's the people who started building in 2017 and built through 2019 2020 and you know AI only had its PMF moment with chat GPT in in

2022 and now they're doing fantastically well. But I would say the people who are building at the moment and who are kind of ignoring the negative sentiment and and the uh dissatisfaction around prices are going to win when we have, you know, this uh this resurgence and hit the kind of hit the tipping point on the S-curve where we, you know, where we go exponential. Um and so what am I looking for for the rest of the year? I would love to see clarity come through. I think my hot take is we're going to see many more fintexs and neo banks connect crypto and offer yield products to their customers. Uh and you're going to see continued uh participation via tokenization from traditional asset

managers and and bulge bracket banks and that's ultimately going to bring more users in. So more stable coins, more tokenized assets um means more revenue to uh you know to um to uh DeFi protocols and teams. Sid Powell, Maple Finance. Thank you so much for coming on the Milkro Show and sharing all these insights with us. I think there's a lot of great alpha in this. Uh where can we send people to find more of you and your work online? >> As we've got on the handle there. So I am @ syrupsid on Twitter. Uh we are Maple Finance, one word on X, I should say. And uh if you want to go to our website, it's maple.inance. And you know, we have a contact us page there, but that's where we post updates. But we're very active on X. So, you know, hit the follow button.

>> Well, I'm going to be paying attention. I'm really excited about what you guys are building and I appreciate you coming on the Milk Road Show to share all these updates with us. Thanks for being here, Sid. >> Thanks for having me, John. My pleasure. >> And thank you all for joining us. I hope you all learned something today. So, until next time, stay safe, stay educated, stay bullish, and we will see you all on the next episode of the Milkro Show. Thanks for being here, everyone. Bye. Want insights on what's moving crypto markets and how [music] we're trading each event? Subscribe to our channel and join the Milk Road daily and pro newsletters and start investing like the top [music] 1%. This show is for educational purposes only. Nothing we say is financial advice. Investing is risky. Never invest more than you can afford to lose.