FAQ
General
What is Morpho?
Morpho is a trustless and efficient lending primitive with permissionless market creation. It enables the deployment of minimal and isolated lending markets by specifying:
- One collateral asset,
- One loan asset,
- A Liquidation LTV (LLTV),
- An oracle,
- An IRM.
The protocol is trustless and was designed to be more efficient and flexible than any other decentralized lending platform.
Is Morpho the next version of Morpho Optimizers?
While Morpho Optimizers were peer-to-peer layers built on top of lending pools like Aave or Compound, Morpho is an entirely new protocol, separate from Morpho Optimizers and separate from underlying lending pools such as Aave and Compound. One can view Morpho as a new trustless and ultra-efficient base layer on top of which products like Aave and Compound can be rebuilt, along with a variety of other, new application layers.
Why did you choose to build a brand new protocol, rather than continue building on the existing scale of Compound and Aave?
Three key areas stood out for us on current lending protocols: They are
- Not trustless,
- Not efficient,
- Not scalable.
Morpho solves this by separating the risk management layer from the core protocol, enabling permissionless market creation and permissionless risk management with Morpho Vaults. The separation allows Morpho to focus only on lending. As a result, it is immutable (trustless) and ultra-efficient in terms of interest rates and gas consumption. Permissionless market creation and Morpho make Morpho far more scalable than Aave and Compound. Anyone can create markets with any ERC20 asset (blue chip, longtail, RWA), and rebuild Aave-like experiences but with better rates on top of Morpho.
A whole article was dedicated for this question here.
Why do you think the protocol path is better than the decentralized broker one?
Protocols should do less to enable more. This means having a simple codebase focused on providing a simple, efficient, and trustless functionality that users and builders can rely on indefinitely. From there, applications and other projects can build on top of or integrate the protocol to create new use cases or simplify the user experience for end users.
Learn more about this vision here.
How will you incentivize users to use this new protocol/primitive versus the existing lending products they use now?
By design, Morpho aims to optimize three areas that users of any lending protocol care about: interest rates, leverage, and gas consumption. These native benefits should incentivize users to move liquidity from existing protocols to Morpho. A one-click migration tool is developed to make this transition easier. Separately, the Morpho DAO could choose to bootstrap Morpho by incentivizing specific markets with MORPHO rewards. This would have to go through governance.
How will most users access and/or use this new protocol, Morpho?
It will depend on the user persona. More advanced market participants may choose to interact with Morpho directly, particularly borrowers and active lenders. More passive lenders may prefer to earn yield by allocating assets to a vault managed by risk specialists and therefore interact with Morpho through Morpho Vaults.
Will there be a front-end interface for Morpho?
Morpho Labs has built a front-end interface that will be hosted by the Morpho Association here. Further front-ends could be added in the near future.
Lending Protocols
What is the difference between Morpho and Ajna?
Ajna and Morpho are trustless and isolated lending protocols that let users manage their risk. However, the approach differs in several aspects:
- Oracle Integration: Morpho is oracle-agnostic, allowing flexibility in using various oracle implementations for price information. Ajna, on the other hand, is oracle-less and uses an internalized Automated Market Maker (AMM) to determine asset prices, avoiding external dependencies.
- Complexity and Focus: Morpho maintains simplicity by focusing solely on lending, leveraging external oracles. Ajna, without external oracles, incorporates both lending and trading mechanisms, resulting in a more complex protocol.
- Efficiency and Flexibility: Morpho’s approach leads to higher capital efficiency, more flexible market options, lower gas consumption, and a smaller attack surface. Ajna's oracle-less design enhances security against oracle manipulation but at the cost of higher complexity and operational costs.
What is the difference between Morpho and Rari/Fuse?
Morpho is a simpler, permissionless lending primitive, on top of which more complex risk profiles can be rebuilt. More specifically: Fuse pools enable permissionless creation of managed multi-asset pools. Whereas Morpho has permissionless creation of isolated markets, on top of which managed multi-asset pools can be built, 'aka' Morpho Vaults. As such, Fuse pools can be rebuilt on top of Morpho. Fuse pools have no way of sharing liquidity, even if the collateral and borrowable assets are the same. Whereas any number of Morpho Vaults that allocate to the same Morpho markets share the same liquidity.
Security
How has the new protocol been audited for security?
Morpho is known for its industry-leading security practices and follows a multi-faceted approach to security. You can check the list of the security reviews here. There is also two ongoing bug bounty programs with a maximum bounty of $2,500,000
Has the protocol been formally verified?
Yes, the protocol has been properly verified using Certora. You can find more information in the Formal Verification section.
Is there a bounty available?
Yes, there is 2 ongoing bug bounty programs:
What will happen if the protocol gets hacked?
There have been several steps taken to make Morpho the safest place to lend and borrow:
- Core contracts are immutable,
- It is a simple code base that avoids complexities,
- The code has been audited multiple times by top tiers companies
- Formal verification has been applied using Certora,
- 2 ongoing bug bounty programs:
These factors significantly mitigate the chances of an exploit. In the unlikely scenario where there was a vulnerability; Morpho's smart contracts or markets cannot be paused, so it would be up to users to withdraw any funds at risk.
Fees
Will the protocol take any fees?
No, the protocol will not take any fees but like Uniswap, there is a fee switch built into the contract that could be activated via governance for a given market.
Where would fee revenue go?
If activated, revenue from fees would go directly to Morpho DAO.
Will Morpho Labs take any fees?
No, Morpho Labs will not earn any fees from Morpho. Morpho Labs is a research and software development company and a core contributor to the Morpho protocol. Morpho Labs is paid by the Morpho Association (on behalf of Morpho DAO), to contribute to the adoption, growth, and awareness of Morpho.
Will entities that operate Morpho Vaults make money?
Yes, Morpho Vaults creators have the option to set performance fees at the vault level. In a sense, vaults are a way to run a scalable and efficient lending business on top of Morpho markets.
Technical
How do liquidations work on Morpho?
When an account becomes unhealthy, meaning its LTV grows above the LLTV of a market, it becomes eligible for liquidation. Liquidations on Morpho are quite simple: liquidators can liquidate up to 100% of the account's debt and receive the corresponding value of the collateral, plus a relative incentive. You can learn more about liquidations here.
What Interest Rate Model (IRM) does Morpho use?
The interests paid by borrowers is defined by an external IRM that can be selected at market creation among a set whitelisted by governance. You can learn more about the IRM here.
Does Morpho use oracles?
Yes, Morpho uses oracles but it is agnostic to which oracle is used to price assets for a given market. Morpho governance is not responsible for selecting which oracles are used. Instead, a user selects the oracle when creating the market. Lenders and borrowers can then choose which markets they participate in. You can find more on the rationale for using oracles in the whitepaper.
Are all of Morpho's markets contained in a single contract?
Yes, Morpho's contract is a singleton, meaning all markets of a given chain live in one single smart contract. This pattern simplifies interactions and drastically reduces the gas consumption of lending aggregation layers built on top of Morpho.
Does Morpho have account management features?
Yes, Morpho has an authorization system that enables users to grant any address the permission to borrow and withdraw on their behalf, using their position.
This can be done by calling setAuthorization or by signing a message (similar to permit in ERC20Permit tokens). In particular, this system greatly simplifies bundling transactions for externally owned accounts (EOAs) and can simplify the implementation of tailored, granular management systems.
Are flash loans available on Morpho?
Yes, Morpho's singleton has free flash loans allowing one to borrow from all markets simultaneously, as long as they are repaid in the same transaction. This is typically useful in DeFi for liquidations, setting up leverage positions, and onchain arbitrages.
Is there any subgraph usable somewhere?
Yes, users & developers can refers to the API section of the doc and use the deployed subgraphs.
I want to borrow on the market(s) with wbIB01 as collateral, but I am facing trouble. What should I do?
First, one needs to understand that the wbIB01 is a gated wrapped-token of the bIB01 token from Backed Finance that requires a whitelisting process. Thus to be able to use such market, one's wallet needs to be whitelisted, and thus one needs go through the whitelisting process. Note that the wbIB01 wrapper is exchanging 1-1 with the bIB01 tokens. If you are whitelisted but face any issue, jump on Discord and ask the admin there to guide you.
There is no event logs decoded from the contract, but the transaction worked. What is happening?
The solidity version used for deploying Morpho is 0.8.19. Note that the Solidity compiler ("solc") versions prior to 0.8.20 do not include the ABI of libraries in the compilation as stated in the release of the 0.8.20 version. This is thus impacting the events compilation that are defined in the EventsLib library. Please be sure that you have the events in the ABI that you are using.
In case you don't have it, manually add it or use this one.
How to calculate the Rate(s)? What are the calculus to get the Supply APY and Borrow APY?
Please refer to the section on Track Positions and this section about how to retrieve rates. Additionally, the SDK section may also be helpful depending on your specific needs.
What is the precision of the oracle price?
Oracle price is scaled by 36 decimals, giving the general formula for the oracle decimals: 36 + borrowable decimals - collateral decimals. Thus the oracle of the market with DAI (18 decimals) as loan token and WBTC (8 decimals) as collateral token would have 36 + 18 - 8 = 46 decimals.