It seems that Bitcoin does not want to be the sole protagonist on the current stage, and as the BTC/ETH exchange rate continues to hit new lows, Ethereum has finally taken a firm stand and slowly started its engine. The DeFi ecosystem derived from the Ethereum ecosystem is also stirring, and since the interest rate cut meeting a few months ago, the community has raised the banner of "DeFi rising again".
As one of the three driving forces of DeFi development, the future development of decentralized lending is highly anticipated, and even the Trump team has intervened, announcing the launch of the lending project WorldLibertyFinancial (WLF).
In the discussion of who will lead the revival of DeFi, Morpho, which just announced in early August that it had raised $50 million in financing and had a total financing of over $80 million, has been frequently nominated.
I. What is Morpho?
In the decentralized finance (DeFi) market, decentralized Staking has become an important means of enhancing blockchain network security and incentivizing users. However, although Staking can increase network security, capital efficiency and liquidity are still the main challenges it faces. For example, in the lending market, over-collateralization reduces capital efficiency, and when the demand for lending does not match, the funds are often idle and cannot be fully utilized.
To solve these problems, DeFi protocols have introduced the "pool-to-pool" and "peer-to-peer" (P2P) models. This model can match the needs of borrowers and lenders, thereby improving capital efficiency.
The Morpho protocol is based on this idea and aims to optimize the capital efficiency of lending pools. It is a lending pool optimizer, built on top of lending protocols such as Compound and Aave. Through the peer-to-peer model, Morpho can match the needs of lenders and borrowers, improve capital utilization, while maintaining liquidity and liquidation mechanisms.
Specifically, users on the Morpho protocol can obtain a higher annual yield (APY) than traditional lending protocols, i.e. P2P APY, and both lenders and borrowers can benefit from it. Morpho's innovation improves capital efficiency, reduces idle capital, and optimizes liquidity.
The Morpho protocol is essentially a lending pool optimizer, built on top of mainstream lending protocols such as Compound and Aave, using the peer-to-peer (P2P) model to match the needs of lenders and borrowers, thereby improving the capital efficiency of the lending pool. Morpho's innovation is that users not only can enjoy the high liquidity provided by platforms like Compound, but also can obtain a higher APY (annual yield) through the peer-to-peer matching mechanism, i.e. P2P APY.
Specifically, the Morpho protocol allows users to interact with the Morpho-Compound market, following the same collateral ratio and liquidation mechanism as the traditional Compound. However, unlike the traditional model, when the demand of lenders and borrowers is successfully matched, both parties can obtain a higher interest return than the original underlying protocol. This model solves the problem of idle capital in traditional Staking protocols, making the capital more efficiently utilized.
II. Morpho's Operating Mechanism
As an aggregator based on existing lending protocols, Morpho optimizes capital efficiency by combining the "peer-to-peer" (P2P) and "pool-to-pool" models, improving the capital efficiency of the lending pool. Morpho's innovation lies in that it provides liquidity through existing lending pools (such as Compound, Aave, etc.), and optimizes capital utilization through the peer-to-peer model, enhancing the yield experience of both borrowers and lenders.
- Combination of pool-to-pool and peer-to-peer models
- Pool-to-pool model: Morpho is built on top of existing lending pools (such as Compound, Aave), providing the same liquidity.
- Peer-to-peer matching: When users deposit assets into Morpho, Morpho will try to match them with borrowers' needs, forming a peer-to-peer lending relationship, improving the capital efficiency of the lending pool.
- Yield enhancement: Through peer-to-peer matching, both borrowers and lenders can obtain a higher APY. Specifically, the borrower's APY is usually higher than the lender's APY, and through Morpho's matching, both the borrower and the lender can obtain an P2P APY between the two, enhancing the yield of both parties.
- Separation of debt and deposits
- onComp: The deposit balance is measured through the underlying lending pool (such as Compound), represented by cToken or aToken.
- inP2P: The part matched through peer-to-peer lending, the deposit balance is measured by mToken, representing the funds matched between the borrower and the lender.
- Debt tracking mechanism: Morpho can accurately track users' debt and deposit balances by separately managing deposits and borrowings between "onComp" and "inP2P".
By introducing the combination of peer-to-peer and pool-to-pool models, Morpho has improved capital efficiency and optimized the lending experience on the basis of existing lending protocols. Borrowers and lenders not only can obtain higher yields, but also can enjoy instant liquidity and low-risk lending experience. Morpho's innovation lies in its use of a matching engine to improve capital efficiency, and the $MORPHO token brings governance and incentive mechanisms to the protocol, further enhancing the sustainability of the protocol.
III. Morpho Team and Financing Information
The Morpho protocol was co-founded by Paul Frabot and Vincent Danos, and after 9 months of development, it has received support from well-known investment institutions such as a16z, Variant and Coinbase Ventures, with financing exceeding $20 million.
IV. Morpho Token Economics
The Morpho token is $MORPHO, with a maximum total supply of 1,000,000,000, and the currently deployed tokens are non-transferable. The Morpho DAO (composed of MORPHO holders and delegates) is responsible for managing the Morpho protocol. The governance system adopts a weighted voting system, where the number of MORPHO tokens held determines the voting rights.
MORPHO holders can vote on changes or improvements to the protocol, including:
Initiatives to develop the future of the Morpho protocol;
Deployment and ownership of Morpho smart contracts;
Turning on/off the fee switch built into the Morpho smart contract;
The token distribution plan is as follows:
Morpho DAO owns and controls: 35.7% (375,000,000 MORPHO)
Strategic partners: 27.6% (276,000,000 MORPHO)
Founding team: 15.2% (152,000,000 MORPHO)
Morpho Association: 6.6% (66,000,000 MORPHO)
Morpho Labs reserve fund: 6% (60,000,000 MORPHO)
Early contributors: 4.8% (48,000,000 MORPHO)
Protocol users and launch pool participants: 4.2% (42,000,000 MORPHO)
V. Analysis of Morpho's Future Value
As an innovative DeFi lending optimization platform, Morpho has strong market potential and technical advantages. It brings more efficient capital utilization and better user experience to the lending market, in line with the development trend of DeFi. With the participation of more users and the continuous development of the ecosystem, the $MORPHO token is expected to become an important asset in the DeFi field.
The continuous expansion and maturity of the DeFi market, especially in areas such as lending, derivatives and stablecoins, means that the market demand for Morpho will continue to increase. Morpho's innovative model is exactly in line with the current DeFi market's urgent need to improve capital efficiency and optimize the user experience.
