Enabling Diverse Risk Profiles
Going beyond one-size-fits all
Every user has their own tolerance for risk, while each collateral asset has a set of associated risks, some with more than others.
For that reason, users with a lower risk tolerance may prefer to avoid lending against certain collateral assets, whereas it may be the opposite for users with a greater appetite for risk.
However, a core limitation of multi-asset lending pools is that all users are forced into a one-size-fits-all risk profile, regardless of their risk appetite.
The above illustrates how every lender to a multi-asset pool is exposed to every collateral asset in the pool: wstETH, WBTC, LINK, USDT, sDAI, DAI, rETH, RPL, AAVE, USDC, LINK, etc. There is no option to lend against specific collateral or a combination of collateral assets aligned with one's tolerance for risk.
Catering to any risk profile
Morpho Vaults (formerly known as MetaMorpho) are built on top of Morpho’s (formerly known as Morpho Blue) isolated markets with each vault having a unique risk profile determined by the markets they lend to.
Lenders can choose to deposit in vaults that best align with their risk appetite. Users with a higher risk tolerance can deposit in a vault that lends to “riskier” markets and vice versa.
For example, the chart shows three different lenders depositing into three different vaults:
- USDC Vault lending to wstETH/USDC & wbIB01/USDC.
- ETH Vault lending to wstETH/WETH & sDAI/WETH.
- ETH Vault lending to weETH/WETH, osETH/WETH, and swETH/WETH.
Each lender can deposit into one or more vaults to tailor their risk exposure:
- Lender #1 has exposure to wstETH (crypto) and wbIB01 (RWA) markets.
- Lender #2 has exposure to wstETH and sDAI markets.
- Lender #3 has exposure to weETH, osETH, and swETH markets.
Here, lenders can opt in and out of certain markets by selecting specific vaults. This architecture enables a level of flexibility unattainable by traditional lending pools. It can scale to any number of vaults, markets, and risk profiles catering to any risk profile imaginable.