Fee Wrapper

What is a Fee Wrapper?

A Fee Wrapper is a Vault V2 configured in a specific, constrained mode that enables distribution channels to add a fee layer on top of an existing Morpho Vault V2.

1. Main Morpho Vault V2: Handles actual capital allocation to Morpho Markets (V1, V2, future versions). This is where yield is generated.
2. Fee Wrapper: A lightweight Vault V2 that deposits into the main Morpho Vault V2, with the sole purpose of adding a fee layer per customer/distributor.

Key Properties

Architecture

A Fee Wrapper is deployed with a carefully designed split between immutable, defaulted, and configurable parameters.

Fixed at deployment (addAdapter / removeAdapter abdicated):

• The single adapter pointing to the underlying Morpho Vault V2
• The adapter registry lock (no new adapters can ever be added)

• Absolute and relative caps set to maximum values
• Max rate set to maximum
• Force-deallocate penalty set to 2% (MAX_FORCE_DEALLOCATE_PENALTY)
• Liquidity adapter set to the single Morpho Vault V2 adapter
• All roles (Curator, Allocator, Sentinel) default to the owner

• Owner address
• Vault name and symbol
• Performance fee (up to 50%) and management fee (up to 5%)
• Fee recipient address
• Gate abdication mode (abdicateNonCriticalGates)

Gates & Non-Custodiality

Gates control who can interact with the vault. Each gate is a contract slot that, when set, enforces on-chain rules on a specific action. A Fee Wrapper has four gates:

The three critical gates can prevent users from accessing their own funds if misconfigured. The fourth gate (sendAssetsGate) only restricts who can receive withdrawn assets and cannot lock funds.

By default all four gates are set to address(0) (permissionless): anyone can deposit, withdraw, and transfer shares freely.

Non-custodial (recommended for DeFi)

Permanently abdicate the three critical gate setters at deployment. This locks them to address(0) forever - no one can ever restrict user access to funds. This action is irreversible.

The non-critical sendAssetsGate remains configurable so the curator can still set withdrawal-recipient rules post-deployment if needed, without affecting fund safety.

Compliance-ready (KYC/AML)

Keep all gate setters configurable and set gate contracts post-deployment to enforce on-chain rules (e.g., KYC whitelists). The curator can set or change gate contracts at any time via timelocked actions.

This enables compliance-ready distribution but makes the vault partially custodial, because the critical gates could restrict certain users from accessing their funds.

For more details on gates, see the Gates concept page and the Abdicate Gates tutorial.

Use Cases

• B2B Distribution: Distributors can deploy one Fee Wrapper per customer, each with custom fee configurations
• Revenue Sharing: Split native yield between the distribution channel and end users (e.g., 50/50 split via fee configuration)
• White-Label Products: Distributor can offer Morpho yield under their own brand with their own fee structure

Yield and Rewards

Native yield comes from interest paid by borrowers on underlying Morpho Markets. It accrues automatically to shares over time, requiring no separate claim - shares simply appreciate in value. Users withdraw the same token they deposited (e.g., USDC) plus accrued interest. Performance and management fees are applied to this yield.

External rewards (e.g., MORPHO tokens) come from incentives provided by Morpho governance, market creators, or token issuers, and are distributed via Merkl (updated every 8 hours). These rewards require a separate claim action through Merkl and are automatically forwarded to end depositors by default. It is possible to implement custom distribution. For specific reward routing (e.g., distributor claims rewards instead of users), coordinate with the Merkl team for address remapping configuration.

Deployment

Fee Wrapper Demo App

The simplest way to deploy a Fee Wrapper is through the Fee Wrapper Demo App, which provides a UI to:

• Deploy a new Fee Wrapper
• Check if a Fee Wrapper is properly configured
• Update fees on an existing Fee Wrapper
• View the full yield breakdown for a fee wrapper address

Find the factory addresses in the addresses section.

Programmatic Deployment

For programmatic deployments, the FeeWrapperDeployer periphery contract handles all configuration steps in a single transaction.

Function Signature

The createFeeWrapper function takes three parameters:

FeeWrapperConfig Fields

Deployment Phases

The deployer executes the following steps atomically in a single transaction:

1. Create vault - deploys a new Vault V2 with the deployer as temporary owner
2. Adapter setup - creates the MorphoVaultV1Adapter, adds it, then permanently abdicates addAdapter and removeAdapter
3. Allocator setup - grants allocator role to deployer (temporary, removed at step 10) and owner
4. Caps configuration - sets absolute cap to max and relative cap to 100%
5. Allocator configuration - sets liquidity adapter and max rate (200% APR)
6. Penalty configuration - sets force-deallocate penalty to 2%
7. Optional fees - sets fee recipients then fees (performance and/or management)
8. Optional gate abdication - permanently abdicates the 3 critical gate setters for non-custodial guarantees
9. Token metadata - sets name and symbol if provided
10. Ownership transfer - removes deployer privileges, sets sentinel/curator/owner to the final owner

Integration Guide

Query the Morpho API to compute post-fee APY. No on-chain reads needed - all data comes from the API.

query FeeWrapperAPY {
  feeWrapper: vaultV2ByAddress(
    address: "0x2861ABE7AB28484Fb8375def4A7eb56C8F53fE8F"
    chainId: 8453
  ) {
    avgNetApy
    avgNetApyExcludingRewards
    performanceFee
    managementFee
    name
    symbol
    rewards {
      supplyApr
      asset { address, symbol }
    }
    adapters {
      items {
        type
        address
        ... on MorphoVaultV2Adapter {
          innerVault {
            address
            name
            avgNetApyExcludingRewards
            performanceFee
            managementFee
            rewards {
              supplyApr
              asset { address, symbol }
            }
          }
        }
      }
    }
  }
}

// innerVault.avgNetApyExcludingRewards already includes inner vault fee deductions
adapterYield = innerVault.avgNetApyExcludingRewards
wrapperPerfFeeDeduction = max(adapterYield, 0) * feeWrapper.performanceFee
nativeYield = adapterYield - wrapperPerfFeeDeduction - feeWrapper.managementFee
rewardsApr = sum(innerVault.rewards[].supplyApr)
netApy = nativeYield + rewardsApr

More Fee Wrapper API data can be found here.

Roles & Auth Model

All roles default to the owner at deployment:

• Owner-level: Transfer ownership, set roles - no timelock
• Curator-level: Change fees, fee recipients, caps - timelocked
• Allocator-level: Allocate/deallocate to the adapter - no timelock

Security Considerations

• Change performance fees (up to 50%, timelocked)
• Change management fees (up to 5%, timelocked)
• Change fee recipients (timelocked)
• Add/remove allocators (timelocked)

• Change the underlying vault (abdicated)
• Add new adapters (abdicated)
• Remove the existing adapter (abdicated)
• Access user funds directly
• Prevent users from exiting (via forceDeallocate)