Curriculum·Graduate·G806
Cross-Border Distribution and RWA as Collateral
Maple Finance and Orthogonal Trading, December 2022. Maple ran on-chain lending pools where lenders deposited funds that were lent to vetted borrowers, a way of bringing real-world credit on-chain, and Orthogonal Trading was one of its large borrowers.
Lesson 1 opens on
Maple Finance and Orthogonal Trading, December 2022
Maple Finance ran on-chain lending pools: lenders deposited funds into a pool, and a pool manager lent them out to vetted institutional borrowers, a way of bringing real-world credit, lending to actual businesses, on-chain. Orthogonal Trading was one of its large borrowers.5 million dollars, and on 3 December 2022 it disclosed that it could not repay: it defaulted on eight loans totaling around 36 million dollars, a loss the lenders in the pools bore, roughly an 80 percent hit to the remaining lenders in the larger pool.
The lessons
- G806-01Credit risk comes through the on-chain doorExplain that tokenizing a real-world loan does not remove its credit risk, only changes how it arrivesabout 34 min · opens on Maple Finance and Orthogonal Trading, December 2022
- G806-02Cross-border distribution under MiCA and comparable regimesExplain that distributing a token across borders subjects it to each jurisdiction's regime, not the most permissive oneabout 35 min · opens on SEC v. block.one (the EOS ICO), September 2019
- G806-03RWA as DeFi collateral: inheriting the underlying's riskExplain that collateral inherits the value and liquidity risk of its underlying, so weak collateral fails when the underlying doesabout 35 min · opens on The collapse of Bear Stearns, March 2008
- G806-04Composability, and how one default spreadsExplain that composability makes protocols depend on each other, so one heavily-connected failure spreads to all connected to itabout 34 min · opens on The near-collapse of AIG, 2008