Morpho

Morpho Blue is a decentralized protocol enabling the overcollateralized lending and borrowing of crypto assets (ERC20 Tokens) on the Ethereum Virtual Machine. The protocol is implemented as an immutable smart contract, engineered to serve as a trustless base layer for lenders, borrowers, and applications.

Morpho Blue is licensed under a dual license (BUSL-1.1 and GPLv2) which you can find here. Once deployed, Morpho Blue will function in perpetuity, provided the existence of the Ethereum blockchain.

Why

Within a year, Morpho has become the third-largest lending platform on Ethereum, with over $1.5B in deposited assets.

Morpho's initial version, Morpho Optimizer, operates on top of Compound and Aave to enhance the efficiency of their interest rate model. But consequently, Morpho Optimizer’s growth is constrained by the current underlying lending pool design.

In particular, the current lending paradigm is:

• Not Trustless: It relies heavily on its DAO and trusted contractors to monitor and update hundreds of risk parameters daily or upgrade large smart contracts.

• Not Efficient: It provides inefficient rate spread, low collateralization factors, and charges fees to maintain the platform itself.

• Not Flexible: It has a limited number of assets listed. Users have no choice but to subscribe to the one-size-fits-all risk-return profile proposed by the DAO.

Although DeFi lending has grown rapidly under existing protocols like Aave and Compound, we need to rethink decentralized lending from the ground up to reach the next order of magnitude. Having spent two years developing the most significant platform built on top of these onchain funds, Morpho is uniquely positioned to recognize and address its limitations. As anticipated in the initial whitepaper, Morpho must metamorphose to become fully autonomous and improve the current state of DeFi lending.

We call this evolution Morpho Blue 🟦.