About the editor: Spencer Noon is Co-founder & General Partner at Variant Fund.

PSA: There will be no newsletter issue next week! See you on July 15th.

Network Coverage
Coverage on Maple, Compound, and Euler.

• Maple builds infrastructure allowing “delegates” to source capital from lenders and issue under-collateralized loans to borrowers, on Ethereum and Solana. In recent weeks, withdrawal requests by lenders have outpaced the rate of loan repayment by borrowers, creating a liquidity crunch and almost entirely depleting lending pool cash. TVL has already declined ~35% from its mid April peak, and may fall more as delegates use cash received from future loan repayments to service withdrawal backlogs.

• There have been no defaults, and delegates say interest is still being paid on time. Still, there are >$600m in loans outstanding across Maple’s Ethereum pools, and just ~$12m of “cover” (junior debt liquidated before lenders). If future defaults exceed cover, lenders will likely be impaired.

• Loan originations dropped to ~$300m in Q2, a ~50% drop vs Q1. Because delegate pools are using all cash to service withdrawals (rather than originate new loans), originations likely have more room to fall.

• As participation in governance and cumulative user count continues to grow, the Compound community recently voted on the protocol’s 100th proposal. Proposals range from adjustments to risk parameters to grants and B2DAO contracts. Recent proposals have averaged over 500k votes; Proposals 105 and 109 both garnered over 300 individual voters. Cumulative individual addresses interacting with Compound have grown 59% from ~11k to ~17.5k, continuing trends since July 2021.

• Outstanding borrow volume currently exceeds $800m on Compound, 93% of which is made up by the top three stablecoin markets. This recent decrease in volume is largely attributed to falling prices of WBTC and ETH, and a reduction in recursive borrowing after March’s COMP rewards distribution halving.

• The safety of the Compound protocol has been reinforced by recent liquidations resulting from the market’s volatility. Over the last 30 days, the protocol has processed 2,609 individual liquidations. Compound's liquidations ushered $143,252,175 of borrowed capital back into the protocol.

• Euler is a decentralized lending protocol. It introduced two key innovations: a borrower-friendly liquidation mechanism and risk-tiered, permissionless pools. First, it’s “soft liquidation” mechanism allows the liquidation bonus (% of collateral paid to liquidators) to be determined by a dutch auction. Second, isolated tier asset pools can be created for any asset with a Uni V3 TWAP price feed. In early June, Euler’s TVL ~2x’d to ~$250m, before settling to ~$200m; it is currently the 4th largest lending protocol on mainnet by TVL. Euler is tracking ~$332m total supply and ~$123m total borrowed.

• Euler’s soft liquidation mechanism recently experienced considerable stress tests. On June 13, the protocol saw 8 liquidations at a liquidation bonus of ~3.7%, the lowest of major lending protocols, meaning there’s a less incentive for positions to be liquidated.

• Much of Euler’s TVL growth came from wstETH. Since Euler allows lenders to create a market for long tail assets, a pool was quickly created and promoted to the highest asset tier through governance. Euler now controls the ~$62m lending market for wstETH.