Public Allocator: Just-in-Time Liquidity
Morpho's design of isolated markets provides unparalleled risk containment. However, it can also lead to fragmented liquidity, where capital is spread across multiple markets instead of being concentrated in a single pool. For a borrower, this could mean a market they want to use doesn't have enough liquidity for their desired loan size.
The Public Allocator is the elegant solution to this problem. It is a smart contract that functions as a liquidity router, providing just-in-time liquidity by reallocating assets between markets on demand.
What is the Public Allocator?
The Public Allocator is a publicly callable contract that can move a vault's idle or under-utilized assets into a market where a borrower needs them, right at the moment they need them.
From a borrower's perspective, this transforms a series of isolated, smaller pools into a single, deep source of liquidity, combining the safety of isolated risk with the convenience of a pooled lending model.
How It Works for a Borrower
Imagine a user wants to borrow 1,000 WETH from the wstETH/WETH market, but that specific market only has 200 WETH available.
1. Liquidity Request
The user (or your application on their behalf) initiates the borrow. The system detects the 800 WETH shortfall.
2. Public Allocator Triggered
Instead of failing, a call is made to the Public Allocator. It instantly finds the 800 WETH from other markets where the same lending vault has capital (e.g., from an idle pool or an under-utilized rETH/WETH market).
3. Liquidity Reallocated
The Public Allocator executes a reallocate function, moving the 800 WETH into the target wstETH/WETH market.
4. Borrow Executed
The wstETH/WETH market now has 1,000 WETH available. The user's borrow transaction succeeds seamlessly.
When integrated with a Bundler, this entire process—reallocation and borrowing—happens atomically within a single transaction. The user experience is simple: they see deep liquidity and execute one transaction.
Curator Controls: Flow Caps
This on-demand reallocation is not a free-for-all. Vault curators retain full control over how their liquidity can be moved by setting Flow Caps on the Public Allocator for each market.
maxIn: The maximum amount of assets that can be moved into a market by the Public Allocator.maxOut: The maximum amount that can be moved out of a market.
These guardrails ensure that while liquidity is flexible, it always operates within the risk parameters defined by the vault's curator.
Benefits for Your Integration
- Offer Deeper Liquidity: Allow your users to execute large borrows without worrying about the liquidity of a single market.
- Improve User Experience: Abstract away the complexity of fragmented liquidity. Users interact with one market and get the liquidity of many.
- Maintain Security: Benefit from a pool-like experience while retaining the underlying risk isolation of Morpho's core architecture.
Now that you understand what the Public Allocator does, learn how to integrate it into your borrowing flow.