Morpho
A permissionless decentralized lending protocol on Ethereum and Base that optimizes rates by matching lenders and borrowers peer-to-peer atop pools like Aave and Compound.
What is Morpho?
Morpho is a DeFi lending platform launched in 2022 by Morpho Labs, enabling users to supply and borrow over 50 digital assets across customizable, isolated markets with overcollateralization ratios starting at 110%. It operates in two modes: Morpho Blue for developers to create tailored markets with programmable interest rate models (e.g., Jump Rate Model) and Morpho Vaults for curated, allocator-managed pools that automate yield optimization, offering lenders APYs up to 8% on assets like ETH and USDC. As of September 2025, Morpho’s TVL exceeds $6 billion, with $2.5 billion in active loans, making it the largest DeFi lender on Base (surpassing Aave) and the second-largest overall behind Aave at $12 billion TVL.
The native digital asset, MORPHO, with a circulating supply of 100 million and total supply of 1 billion, facilitates governance through the Morpho DAO, where holders vote on parameters like fee switches (currently off, directing 100% of revenue to the treasury) and integrations. Priced at approximately $3.08 USD with a market cap of $308 million, MORPHO has seen 25% YTD gains amid expansions to Arbitrum and Optimism, generating $15 million in monthly fees from borrow interest (0.1-2% annually) and liquidation bonuses. In June 2025, Morpho Labs transitioned to a nonprofit structure under the Morpho Association to prioritize protocol reinvestment over equity returns, holding $40 million in DAO-controlled tokens for developer incentives.
Morpho differentiates via peer-to-peer matching for 20-50 basis point better rates than base pools, supporting flash loans and isolated risk (no cross-market liquidations), with over 25 audits from firms like Trail of Bits ensuring security—though a March 2025 faulty update briefly paused operations without fund loss. Risks include oracle dependencies (using Chainlink) and market volatility triggering liquidations (e.g., 5% of positions in Q2 2025), mitigated by diversified collateral and a $50 million insurance fund.
Related Terms
Fee Tier
The percentage fee charged on DEX trades, set by liquidity pools and distributed to liquidity providers, varying by pool type and volatility.
Conversion Ratio (MSTR)
The number of common shares receivable per convertible security upon exercise.
BIS Stablecoin Principles
Bank for International Settlements' guidelines stressing regulation for stablecoins to mitigate financial stability risks and ensure they function as sound money.
Payment Rails
Infrastructure for processing and settling digital asset transactions.
APY （DeFi）
Annual Percentage Yield (APY) is the annualized rate of return on an investment or loan, accounting for compound interest earned or paid over a year.
Cross-Chain Swap
A cross-chain swap is the exchange of digital assets between two different blockchain networks, facilitated by bridges or protocols to enable interoperability.