Morpho Protocol is an Ethereum-based lending and borrowing platform with various innovative products and models that originated after Aave and Compound.
Morpho Protocol is conquering the middle of the cryptocurrency market with complementary new products against Aave and Compound’s dominance.
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Morpho Protocol acts as an abstraction layer between users and a lending pool. For example, when one lends some funds to Morpho, the protocol allocates those assets to lending pools and gives them interest-bearing tokens, ibToken. These tokens represent the proportion of the deposited assets belonging to the user and automatically increase over time.
When somebody wants to borrow from Morpho Protocol, it lends through ibToken. Thus, the lender and the borrower would be ensured a 100% utilization rate for better interest rates.
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Morpho Optimizer will be the first product Morpho Protocol offers. It will change the lending market by integrating both Peer-to-Peer and Peer-to-Peer models.
Morpho Optimizer will merge both models by creating a peer-to-peer lending layer on top of Aave and Compound protocols, leveraging their liquidity. When the product is used, a user’s peer-to-peer lending and borrowing orders will be given priority. If there is no full or partial match in the order book, the residual liquidity will be transferred to Aave or Compound. If suitable, Morpho will withdraw liquidity from these protocols to match new orders on Morpho Optimizer.
Ideally, this model would match the borrowers and lenders to enable peer-to-peer transactions at the best possible interest rate. The unmatched liquidity would then be routed to Aave or Compound for normal execution.
However, this method has some glaring drawbacks: high fees from the multiple actions involved and dependence on the underlying liquidity layers such as Aave and Compound. Moreover, the Morpho Optimizer itself would hardly scale across other chains.
Morpho Blue launched in early 2024 to create flexibility for the Lending market. Built from 600 lines of code, it was initially developed on Ethereum and is expected to support Layer 2 Base and many other EVM chains.
To date, it is the most open and flexible lending market version. It empowers anyone to create a lending Pool and customize arbitrary parameters like Collateral, loan assets, Collateral ratio, and Oracle.
He has a massive amount of sUSDe at his disposal; Party A can create a lending pool for sUSDe, collateralizing DAI, and then A deposits his sUSDe into the Pool for others to mortgage DAI to borrow sUSDe from the Pool or lend sUSDe. Friend B has many stETH and opens a stETH lending pool with USDT and USDC as collateral. Then, friend B deposits his stETH into the pool for lending so that users can also mortgage USDT or USDC to borrow stETH or lend stETH.
It allows the creation of lending pools with changeable, configurable parameters—that suit diverse tastes. This empowers projects to execute strategies that will serve their goals. In one example, Spark built a 300 million DAI lending pool (a subsidiary of MakerDAO), which used USDe and sUSDe as collateral to increase accessibility to DAI for holders of Ethena’s stablecoin.
However, Morpho Blue adds complexity to the user and fragments liquidity because it creates many small retail markets with particular needs. The following product, MetaMorpho, described below, will solve this problem.
It is designed to overcome Morpho Blue’s shortcomings by creating Vaults with loans and multiple collateral assets managed by risk analysts—such Vaults function according to the ordinary logic of Morpho Blue’s Lending Pools.
On the end-user side, MetaMorpho simplifies operations and dynamically allocates liquidity to the most appropriate pools according to the guidelines provided by risk analysis managers. All three products are running well and are managed by the Morpho association.
Shortly, with the project completely decentralized, the DAO will manage all activities of the Morpho Protocol directly. Morpho Optimizer will work in a stand-alone manner without expansion, and Morpho Blue, with MetaMorpho, will work on development and multiply-chain expansion.
MORPHO tokens are used for voting on governance decisions, which involve the following:
Morpho Protocol was founded by fresh graduates, most of whom studied at Télécom SudParis and École Polytechnique in France. The team comprises Paul Frambot, Mathis Gontier Delaunay, Merlin Egalite, Julien Thomas, Oumar Fall, and Evelyne Raby. The team has deep knowledge of blockchain technology.
Most key members are new to the professional world and have not spent considerable time working for large enterprises. One exception is Evelyne Raby, who heads the Operations division and has previously worked as a Program Manager for Amazon.
The project raised more than $69 million in capital across three rounds:
Morpho Protocol is the only lending project since DeFi Summer 2020 to raise almost $70 million and become the lending protocol with the most significant capital in the market. Funds such as A16z, Pantera, and Coinbase participated in the project’s most recent funding rounds. These funds also invest in some of the leading DeFi projects, including Uniswap, Compound, DyDx, MakerDAO, 1inch, Injective, and Ondo.
Morpho Protocol does not follow a specific development roadmap. Instead, the project researches the market, builds products, and then announces them to the community. So far, it has demonstrated a robust portfolio and the flexibility to serve users effectively.
Morpho Protocol will focus on fully decentralizing, including listing MORPHO tokens on exchanges. The team also plans to expand its market reach across various chains, form new partnerships, and support projects integrating with Morpho products.
Lastly, having retained the ideology to improve its offerings, the Morpho Protocol optimizes and flexibles the lending market. This phase competes directly with well-known protocols such as Aave and Compound.
CoinCu rates this as an emerging project that investors should monitor for future airdrop opportunities.
It aims to increase efficiency and ease of access to DeFi apps through scalable, secure, user-friendly protocols.
Morpho works on Ethereum and Base.
It exposes one to smart contract vulnerabilities, market volatility, and probably governance challenges.
DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing. |
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