Useful links & metrics

| Protocol | Morpho | | Strategy | Morpho’s-Aave V2 Optimizer | | App | https://aave.morpho.xyz/ // https://aavev2.morpho.xyz/ | | Docs | https://docs.morpho.xyz/start-here/homepage | | Blog | https://medium.com/morpho-labs | | White Paper | https://whitepaper.morpho.xyz/ | | Yellow Paper | https://yellowpaper.morpho.xyz/ | | GitHub | https://github.com/morpho-org | | Total supply to date | $723,000,000 |

Context

Earlier this month, the Origin Protocol released Origin Ether (OETH), an ETH yield aggregator that optimizes yield between liquid staking derivatives and liquidity provision on AMMs. In less than 2 weeks, OETH attracted more than $10m of TVL.

Morpho and Origin Protocol have a long-standing relationship with $17m of OSUD collateral being deposited in Morpho-Aave V2, earning an improved APY.

This RFC proposes allocating part of the OETH’s ETH collateral in Morpho’s Aave V2 Optimizer to earn interest from lending ETH while providing the OETH basket with highly liquid diversification.

About Morpho

Overview

Morpho is a lending protocol, the third biggest on Ethereum after Aave and Compound, with +$700m currently deposited. Morpho improves the capital efficiency of positions on lending pools such as Aave and Compound by matching lenders and borrowers peer-to-peer, strictly improving APY on both sides. While offering superior rates, Morpho preserves the same user experience, liquidity, and parameters as the underlying lending protocol.

Morpho has raised $20M, with the latest $18M funding round led by a16z crypto and Variant.

Morpho value proposition

On Morpho, depositors/borrowers can receive two rates:

• Liquidity is matched peer to peer: users receive an improved rate, called the p2pRate
• Liquidity is not yet matched (peer to pool): users receive the APY of the underlying pool Indeed when a Morpho user is not matched, Morpho will tap into the liquidity of the underlying lending pool. In this case, Morpho redistributes all the pool APY + all pool liquidity rewards.

If there are not enough peers to match the total amount that a user deposited/borrowed, it is possible to have some funds matched and the rest sourced through the pool. In this case, the liquidity that matches P2P will earn the P2P APY while the rest of the liquidity will earn the pool's APY. Either way, users always have the incentive to deposit in Morpho as they’re getting better/equal rates equal to one of the underlying protocols alongside MORPHO tokens that are currently distributed

Using Messari’s data from Q1-23, Morpho’s Aave V2 Optimizer outperforms the underlying pools by:

• +42.85% on the DAI market