The risks of DeFi do not lie in decentralization, but rather in insufficient decentralization. Let's talk about Morpho, which has recently been in the spotlight.

I am researching the use of Morpho to construct delta-neutral and delta-biased strategies. I did not expect the events of stablecoin de-pegging and lending defaults to occur consecutively, pushing Morpho into the center of public discourse.

The value of financial instruments lies in improving capital efficiency.

By this standard, Morpho is an excellent project that enhances capital efficiency. Morpho v1 builds on the peer-to-pool lending of Aave and Compound, matching peer-to-peer lending demands and reducing the interest spread between lenders and borrowers to zero.

Morpho Blue allows individuals or institutions to create lending markets for mainstream or long-tail assets without permission, with customizable parameters such as collateral and liquidation loan-to-value (LLTV).

This makes Morpho more than just a lending market. Users can freely create delta-neutral or delta-biased yield strategies using Morpho or hedge their exposure risks.

This is also the reason why traditional institutions like BlackRock are promoting RWA—blockchain is a significant complement to traditional finance in terms of efficiency.

The strong composability and customizability also bring external risks to Morpho. First is moral hazard, where the strategy creator, Curator, intentionally raises the LLTV to attract more deposits with high yields, indirectly increasing leverage and the risk of circular lending.

Secondly, there is collateral risk, which refers to the risks associated with the underlying collateral of the lending yield pool. The lack of qualified collateral, especially the risks and transparency issues of the collateral itself, is a significant factor currently constraining the development of DeFi.

This article will explore:

1) What is Morpho? What can be achieved through Morpho?

2) The risks of Morpho.

3) After events like USDe and xUSD, can we still trust DeFi? What are the real issues highlighted by these events?

What is Morpho? What can be achieved through Morpho?

There are mainly two options for using Morpho: Earn (yield) and Borrow (loans).

On the Earn page:

1) Curator is the creator of the current lending yield pool.

2) Collateral is the collateral recovered from the current lending product. The risk of collateral determines the risk of the strategy pool.

The core feature of Morpho Blue is the flexibility of customizable parameters by the Curator. The Curator can decide:

1) The types of deposits accepted, usually stablecoins with good liquidity like USDC.

2) The acceptable collateral, which can be mainstream assets like ETH, WBTC, or long-tail assets and PT tokens. The collateral determines the risk of the strategy.

3) The allocation strategy of deposit funds, i.e., which funds pools to allocate for earning yield.

4) The type of oracle, which can be Chainlink or TWAP, etc.

5) LLTV (Liquidation Loan-to-Value), which triggers liquidation when the loan value reaches a certain percentage of the collateral value. The higher the value, the more aggressive it is, favoring circular lending.

6) Liquidation penalties.

7) Fee structure.

8) Supply cap.

9) Dynamically enable or disable the strategy based on market data.

And so on.

Based on these customizable modules, other projects and institutions can implement different strategies:

1) Utilize the future yield redemption characteristics of Pendle PT-Token and LST to support these two types of tokens as collateral, attracting deposits in stablecoins like USDC and USDT. Essentially, this is using future yields as collateral to exchange for current liquidity, creating a bond market.

2) Raise LLTV, support stablecoins or PT-stablecoins as collateral, amplify leverage, and attract circular lending.

3) Use the leverage of collateral lending (especially circular lending) to go long on assets in Hyperliquid, completing delta-neutral hedging and earning contract funding rates.

4) Establish a bilateral collateral lending market between new stablecoins and mature stablecoins like USDT, USDC, and DAI, combining the forward yield properties of PT-Token to expand liquidity for new stablecoins.

Risks of Morpho

1) Moral Hazard

Moral hazard, also known as the "tragedy of the commons," refers to the strategy creator, Curator, intentionally raising LLTV to obtain more management fees, encouraging circular lending, and allocating funds to higher-risk, higher-APY pools.

The higher the LLTV, the greater the space for circular lending, and the higher the leverage, which increases risk. Typically, the LLTV for stablecoins, ETH, and other assets in lending protocols like Aave and Compound ranges from 75% to 83.5%, while some pools in Morpho may exceed 90%.

However, Morpho has marked the LLTV values on the Earn page. The details page also indicates the fund allocation and management fee collection status.

2) Collateral Risk

Collateral risk arises from the collateral supported by the yield pools created by the Curator. Especially for new stablecoin projects, they often accept PT-Token of these new stablecoins as collateral, using future high yields to absorb current USDC and USDT liquidity. When issues arise with the underlying mechanisms of the new stablecoins—such as failures in delta-neutral hedging strategies or liquidation strategies—these yield pools can collapse.

Fortunately, the risks between Morpho yield pools are isolated and do not affect the overall security of the protocol.

3) High Capital Utilization Leading to Redemption Issues

In the "peer-to-pool" lending model, a common phenomenon occurs: the deposit APY for the same ETH pool may only be 0.1%, while the borrowing rate reaches 2.7%.

To keep capital utilization below 100% and ensure funds are available for withdrawal at any time, the funds provided by depositors far exceed the funds actually used. As a result, a large amount of capital remains idle in the pool, causing the actual deposit APY to be lower than the borrowing APY.

Once the LLTV in Morpho pools is too high and overly friendly to circular lending, there may be instances of insufficient liquidity. In extreme cases, all funds may be in use, preventing deposit users from withdrawing.

After events like USDe and xUSD, can we still trust DeFi? What are the real issues highlighted by these events?

I have always believed that the recent USDe and xUSD events expose the problems brought about by centralization.

In fact, Ethena has detailed disclosures of reserves and the proportion of positions at various exchanges on its official website at https://app.ethena.fi/dashboards/transparency. This data has also been certified by oracle reserves, including Chainlink.

USDe's de-pegging on Binance primarily stemmed from a massive sell-off. The sell-off, coupled with withdrawal restrictions, triggered a de-pegging panic. The source of the massive sell-off may involve vested interests, and the truth may never come to light.

However, the result was that USDe quickly re-pegged—because on Ethena's official website, USDe's redemptions were normal, and reserves remained at 100%.

As for whether xUSD's de-pegging was triggered by excessive leverage ratios leading to ADL, it can only be speculated, and the truth remains unknown.

Thus, these events highlight not the fragility of DeFi, but rather the fragility brought about by CeFi and the lack of transparency in data and rules.

Morpho was initially designed to address the capital utilization issues of the "peer-to-pool" lending model—where borrowing rates are significantly higher than deposit APY.

For example, in the same ETH pool, the deposit APY may only be 0.1%, while the borrowing rate reaches 2.7%.

To keep capital utilization below 100% and ensure funds are available for withdrawal at any time, depositors provide far more funds than are actually used. Consequently, a large amount of capital remains idle in the pool, resulting in the actual deposit APY being lower than the borrowing APY.

On the other hand, "peer-to-peer" matching lacks efficiency, requiring both parties to agree on repayment times and amounts.

Morpho's design is very clever—utilizing existing "peer-to-pool" lending protocols like Compound and Aave, it creates a "peer-to-peer" lending market that reduces the interest spread between lenders and borrowers to zero.

Specifically, users deposit into Morpho, which will transfer the deposits to Aave or Compound. If there is a borrowing request, it will prioritize matching the demand and optimizing the interest rate.

Assuming Alice is the first Morpho user, she deposits 1 ETH. If no one else uses Morpho, after a year, Alice earns 0.1% annualized, which is no different from directly depositing into Compound.

At this point, suppose Bob borrows 1 ETH through Morpho. These two users will be matched peer-to-peer. Within a year, Alice will earn a compromise annualized rate of 1.4%, and the interest Bob needs to pay will also become 1.4%, instead of the original 2.7% from Compound.

Therefore, using Morpho for deposits and loans, the worst outcome is to use the current rates of Aave and Compound, but once demand is matched peer-to-peer, optimized rates can be obtained.

After 2024, the launch of Morpho Blue makes Morpho one of the foundational infrastructures of DeFi. Most importantly, despite having issued tokens and attracted billions in TVL, the project team is still rebuilding and improving the existing product rather than starting a new project, indicating that their ambitions go beyond just making money.

Returning to the beginning, if the value of financial instruments lies in improving capital efficiency, and the reason institutions promote RWA is that blockchain can supplement the efficiency issues of traditional finance, then Morpho is an excellent project worth paying attention to, aligning with the current narrative.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。