Morpho Vault v2

Morpho Vault V2 is a protocol for permissionless lending vaults built on top of the Morpho Markets V1, Morpho Vaults V1 and more.

What are Morpho Vaults V2?

Morpho Vaults V2 represent a major evolution of the vault concept, transforming them from a simple layer on Morpho Market V1 into a universal gateway to onchain yield. They are designed to be protocol-agnostic and future-proof, capable of allocating assets to any protocol, including Morpho Market V1, Morpho Vault V1, and future versions of Morpho.

While retaining the core principle of simplifying yield generation for passive depositors, Vaults V2 introduce a powerful new architecture centered around Adapters, a more granular ID & Cap System, and a curator-managed Vault Interest Controller (VIC).

The Evolution from V1 to V2

Vaults V2 are a significant leap forward, designed for maximum flexibility and control.

• From Specific to Universal: Vaults V1 were tightly coupled to Morpho Market V1. Vaults V2 can connect to any protocol via Adapters.
• From Automated to Curated Yield: Interest in V1 was calculated automatically. In V2, it is set by the Curator via the VIC, allowing the vault to aggregate yield from diverse, complex sources in a gas-efficient manner.
• From Simple to Granular Risk: V1 had simple, per-market caps. V2 introduces a multi-dimensional ID & Cap system, allowing risk curation across abstract factors like a specific collateral type, oracle, or protocol.

Core Concepts of Vaults V2

1. The Adapter Model: A Universal Gateway to Yield

The central innovation of Vaults V2 is the Adapter system. An adapter is a smart contract that acts as a translator, containing the logic to interact with a specific external protocol.

• How it works: The Allocator calls allocate on the vault, specifying a target adapter, an amount, and any protocol-specific data. The vault then transfers assets to the adapter, which executes the supply logic on the target protocol (e.g., supplying to a Morpho Market V1 or depositing into a Morpho Vault V1).
• Future-Proof: New adapters can be developed and enabled by the Curator at any time, allowing the vault to integrate with any new source of onchain yield without requiring an upgrade to the vault itself. Initial adapters include MorphoMarketV1Adapter and MorphoVaultV1Adapter.

2. Granular Risk Curation: The ID & Cap System

Vaults V2 introduce a far more sophisticated system for curating risk. Instead of a single cap per market, Curators can now define and cap risk based on abstract identifiers (ids), where each id represents a common risk factor.

For example, the MorphoMarketV1Adapter can generate ids for:

• A specific collateral asset (e.g., keccak256("collateralToken", stETH_address))
• A specific market configuration (e.g., keccak256("collateralToken/oracle/lltv", ...)).

The Curator can then set both absolute caps (a fixed asset amount) and relative caps (a percentage of the vault's total assets) on these ids. This allows for multi-dimensional risk policies, such as:

• Max total exposure to stETH as collateral: 15M (absolute cap on the collateral id).
• Max 20% of the vault allocated to any market using a specific, new oracle (relative cap).

3. Vault Interest Controller (VIC): Curator-Managed Yield

Because Vaults V2 can allocate to countless protocols, calculating the true aggregate yield onchain in real-time might not be feasible. To solve this, interest rate management is delegated to an external Vault Interest Controller (VIC).

• Curator's Responsibility: The Curator is responsible for monitoring the vault's overall performance and regularly setting an appropriate interestPerSecond via the VIC.
• Flexibility: This design allows the vault to represent yield from sources with complex or delayed accrual, like fixed-term loans.
• Provided Implementations: While a Curator can implement any logic, Morpho provides a default ManualVic, which allows allocators to set the rate up to a maximum defined by the curator. For simpler cases, a SingleMorphoVaultV1Vic is also available, which automatically calculates the rate for a vault that allocates to a single Morpho Vault V1, mimicking the behavior of Vaults V1.
• ERC-4626 Nuance: This manual control is a key reason why Vaults V2 are not strictly ERC-4626 compliant. The standard's totalAssets() is expected to reflect real, accrued interest. In Vaults V2, it reflects the rate set by the Curator via the VIC, which is a curated representation of performance.

4. Advanced Liquidity Management

Vaults V2 separate idle liquidity from allocated capital more explicitly.

• Idle Assets: All user deposits and withdrawals flow through the main vault contract, which holds the idle assets.
• Liquidity Adapter: The Allocator can designate a specific, highly liquid adapter as the liquidityAdapter. If idle assets are insufficient to cover a withdrawal, the vault will automatically pull funds from this market. This adapter also receives all new deposits, ensuring capital is immediately put to work.
• In-Kind Redemptions (forceDeallocate): As a final non-custodial guarantee, users can forceDeallocate assets from any adapter back to the vault's idle pool. By combining this with a flash loan, a user can always exit the vault by exchanging their vault shares for a direct position in an underlying protocol, even if the vault is illiquid. A small penalty applies to disincentivize misuse of this emergency function.

Key Feature Comparison: Vaults V1 vs. Vaults V2

Advanced Role System

Vaults V2 refine the role system for greater security and flexibility:

• Owner: Manages top-level permissions. Can appoint the Curator and Sentinels. Has no direct control over funds or risk parameters.
• Curator: The primary risk manager. Sets adapters, caps, fees, and the VIC. Most actions are timelocked.
• Allocator: The active portfolio manager. Allocates funds to enabled adapters and manages the liquidityAdapter.
• Sentinel: The new Guardian. A safety-focused role that can reactively reduce risk by deallocating funds, decreasing caps, or revoking pending timelocked actions.

Other Key Features

• New Fee Structure: Supports both a performance fee (on yield) and a management fee (on total assets).
• Bad Debt Realization: Adapters report losses to the vault, which are then realized by reducing totalAssets. To prevent manipulation, new deposits are blocked in the same transaction that a loss is realized.
• Gating & Compliance: Optional Gate contracts can be set by the Curator to enforce onchain rules for deposits, withdrawals, and share transfers (e.g., for KYC/whitelisting).