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.