🩵Morpho

Morpho -- Immutable lending primitive that enables Monarch

Understanding Morpho

Morpho Blue is a permissionless isolated lending protocol. Each market operates independently, letting suppliers earn yield by providing liquidity to specific collateral-asset pairs. This isolation enables precise risk management but requires active position management across markets to optimize returns.

Morpho Markets — Trustless Primitives

Morpho is fully permissionless. Once a market is created, no one can stop it from operating or change its risk parameters.

This creates "static" markets. Users who want to adjust their risk profile must actively migrate their assets between markets when parameters become outdated. This includes oracle feeds, liquidation thresholds, and collateral assets.

Vaults

Most users interact with Morpho through vaults managed by risk curators. These vaults follow the ERC4626 standard and simplify the user experience by actively handling market selection and fund allocation. While they offer professional risk management, vaults have tradeoffs:

Vault Characteristics

• Liquidity dilution lowers yields

• High performance and management fees

• Limited customization options

• Potential Incentive misalignment

These tradeoffs led us to develop Monarch as an alternative front-end for power users who want full control, plus Monarch AutoVaults, which we'll explore later.