Title: Upgrade MPL Token Design
Authors and contributors. Maple Core Contributors
Overview: MIP009 proposes to upgrade the MPL token to MPLv2 in order to resource growth initiatives and add new MPL utility. This MIP contains the motivation, details on the technical transition and an evaluation of the benefits.
Well-designed tokens can be a transformational tool for protocol growth when incentives are aligned and protocol development is enabled. Since Maple’s inception in 2021, MPL has been the protocol’s native token. Two years ago it was difficult to envision early success, the ‘credit-crunch’ of last year, the inflexibility of a fixed supply token and downsides of incentive programs.
As the industry evolves and matures, it’s natural that token designs should do so too. Building upon lessons learned along the way and reflecting on the new landscape and opportunity set, Core Contributors propose MIP009, for approval by the Maple DAO.
The motivation for a token upgrade is manifold, but in simple terms is to recapitalize the Maple Treasury to fuel commercial growth initiatives and establish new token utility creating sustainable, long-term growth for the Maple protocol.
Commercial growth initiatives:
- New markets: Our roadmap extends to regions like APAC, LATAM and Europe, where opportunities for institutional adoption are very clear. Each market requires a different mixture of licensing, legal frameworks and rails like wallets and custody technology. As we move into these new markets we will address these specific needs to acquire new institutional customers and drive market penetration.
- New sectors: With new sectors come new customers attracted by a particular offering. Sectors of significance include trade finance, energy finance, and accounts receivable factoring. By navigating into new sectors, Maple can become a diverse and vibrant capital marketplace.
- New partnerships: Maple is already working on mutually beneficial partnerships with L2s, Custodians, DEXs and other Web3 Service providers and intend to bring these to market within the next year. Connecting to customers where they already are removes key UX frictions and helps tap into existing, established user bases to bring new Lenders to the Maple Marketplace, which in turn will drive growth of the lending pools and the protocol as a whole.
New MPL utility:
- Ecosystem Grants: With the aim to attract top-tier credit talent to the protocol, this initiative might see an Ecosystem Grant program provide seed funding to a new Delegate business, or see an initial capital allocation deposited into a pool to help a Delegate and their novel strategy to move from 0-1.
- Pool Delegate alignment: Credit professionals choose Maple to start and scale lending businesses. So that both Delegates and Maple can grow together one idea is to require that Delegates allocate a portion of their fees to buying and staking MPL and to actively participate in Maple DAO Governance.
- Borrower fee rebates: Attracting new Borrowers and keeping them on the platform is an important piece of establishing a credit network and Maple as a leader in lending. This initiative might see borrowers that hold and stake MPL become eligible for rebates which reduce the cost of capital. This creates a flywheel, making Maple a more attractive capital provider, thus resulting in more loans, more payments, and more fees for the Protocol.
- Reduce Lender risk: By Introducing a limited guarantee system for MPL holders lending stablecoins to Pools, varying based on each Pool’s risk profile, this might provide Lenders some limited protection in case of defaults. In this instance, guarantees would be adjusted for risk and the level of MPL held, prompting Lenders to seek MPL during volatility.
- Interoperability and transferability within DeFi: Core Contributors are investigating ways to incorporate LP tokens into other ecosystems in a compliant and scalable manner. By enhancing the liquidity and utility of MPL LP tokens, Maple aims to establish stronger connections with DeFi products and services, creating greater benefits for Lenders. One idea is to establish a vibrant secondary market for Pool deposit tokens. In this envisioned secondary market, Lenders requiring immediate liquidity might be able to swap their Pool tokens. Conversely, Lenders with longer-term horizons could purchase these Pool tokens at a discount.
MIP009 proposes the issuance of new MPL tokens over 3 years, realized as a 1 time issuance of 10% additional tokens and a 3 year emission of 5% per annum to the Maple Treasury. This would immediately recapitalize the Maple Treasury and will facilitate the growth initiatives outlined.
Table 1: Table 1 shows the opening and closing tokens from 2023-2025
Diagram 1: Diagram shows the migration at a smart contract level
If the community supports this proposal through votes with MPL and xMPL, the upgrade will take place in the following months and the transition steps would be:
- Maple Core Contributors develop MPLv2 contracts
- MPLv2 contracts audited by multiple leading audit firms
- Migration takes place
- The new MPLv2 contract would mint 10 million MPLv2 to the migration contract, and 1 million MPLv2 to the Maple Treasury.
- xMPL migration scheduled to complete within 10 days.
- Annualized recapitalisation would commence post scheduled migration
The transition would take place with the aim to have the lightest lift for token holders. In short, xMPL holders would not need to do anything and MPL holders would simply have to come to the Maple webapp at app.maple.finance and follow the prompts to convert legacy MPL for MPLv2. Below is a breakdown of the scenarios for MPL and xMPL holders.
There’s one migration contract which has 10 million MPLv2 minted to it. A MPL holder would interact with that contract to convert MPL to MPLv2 at a ratio of 1 to 1.
To do so, MPL holders would come to the Maple webapp at app.maple.finance and follow the prompts to convert legacy MPL for MPLv2.
Diagram 2: Diagram 2 shows how the migration from MPL to MPLv2 would work at a smart contract level
Images show mock-ups of the webapp where MPL holders would follow prompts to convert to MPLv2.
An xMPL holder would not need to do anything.
Maple has the ability to migrate through a schedule function in the xMPL contract.
In the instance that MIP009 is approved and the code audited, Maple would schedule the migration.
After 10 days, all of the tokens in the xMPL contract would get sent to the migration contract and convert 1-1 to MPL v2.
When any xMPL holder goes to withdraw from the xMPL contract they will receive MPLv2.
Diagram 3: Diagram 3 shows how the migration from xMPL to MPLv2 would work at a smart contract level
To prepare this proposal Core Contributors workshopped ideas with long-time advisors and valued customers over many months. The benefits and risks of the token upgrade were evaluated at length and recommendations and guidance has been incorporated into the proposal. The proposal is now available for evaluation by the Maple Community, who should provide feedback during the 7 day consultation phase commencing at 9am ET on 23rd August 2023 and closing at 9AM ET on 30th August 2023.
Important areas evaluated by the group include smart contract risk, MPL holder experience, ideas around utility, and the outcomes shared below:
- The need to upgrade the token to provide the Maple Protocol with more resources to adapt to changing competitive and macro environment is clear.
- The commercial growth initiatives are focused and make sense for a protocol of Maple’s size and potential. Because the initiatives are SMART, the community will be able to allocate budget towards the initiatives and evaluate success overtime.
- The known mint and emission figures provide certainty to existing token holders and future token holders too.
- Adaptations to token designs are not uncommon and there are examples of significant growth being created for protocols as a result.
- Ideas around utility are well informed and value additive rather than distributive and, in the event they are approved by the community through Maple’s governance process, should create more value for the protocol and token holders overtime.
- Maple would mitigate smart contract risk by working with multiple leading auditing firms to audit the MPLv2 contracts.
- Maple would work with exchanges to ensure a smooth transition and no disparities for tokenholders between legacy MPL and MPLv2.
- The ease of the transition for MPL holders should also be viewed positively as the migration is straightforward for MPL holders and could not be more simple for xMPL holders.
There is no funding request for MIP009. Whilst Maple would engage multiple leading smart contract auditors to audit the MPLv2 contract code - these costs would fall within Maple’s operating expenses.
Additional resource needs.
All code development would be managed by Maple Core Contributors. In addition to working with smart contract auditors, Maple would work with exchanges to ensure a smooth transition and no disparities for token holders between legacy MPL and MPLv2.