Morpho

Morpho is a lending protocol built around simple, isolated markets rather than one large shared pool. Anyone can create a market by specifying a collateral asset, a borrowed asset, an oracle, and a liquidation parameter, and the resulting market is immutable once deployed. Lenders can then supply into that market directly or through curated vaults.

The project started as an optimization layer on top of existing lending pools, matching lenders and borrowers peer-to-peer to improve the rates both sides received while falling back to the underlying pool for liquidity. It later evolved into standalone lending infrastructure with its own primitive markets and a vault layer built on top.

How the two layers fit together

Morpho Markets are the base layer: minimal, isolated, and permissionless, so a failure in one market does not spill into another. Morpho Vaults sit above them and are managed by curators who allocate deposits across multiple markets according to a stated risk policy. A depositor who does not want to pick individual markets can deposit into a vault and let the curator handle allocation, while accepting that curator's judgment as an additional risk.

Isolation allows higher collateralization factors than a shared pool can safely offer, because risk parameters are set per market rather than for the whole system. The contracts are designed to be small and immutable, which reduces the surface area governance can change after deployment.

The MORPHO token

MORPHO is the governance token, with a maximum supply of one billion. It is used to vote on protocol-level decisions such as which interest rate models and liquidation parameters are approved for use, and on how incentives are distributed. The protocol has seen significant adoption on Ethereum and Base, and is used by other applications as a lending backend rather than only as a direct consumer product.