• General

  • Deposit DAI from the Treasury into Morpho-Aave-V2

Hey, 0xloth from Morpho here

Summary

This post would like to propose depositing part of the Olympus Treasury Assets (mainly DAI and WETH) into Morpho-Aave v2.
After discussion with the Olympus Treasury team, we thought proposing an initial amount of $500k worth of DAI to the Morpho-Aave-V2 protocol would make sense. This amount could then be increased up to $10m after 2 months from initial deployment, should the Community see fit.

Background

Morpho is a lending protocol, the third biggest on Mainet after Aave and Compound. Morpho-Aave-V2 has been deployed on Mainnet since August 2022 and has ever since managed to continuously attract more liquidity, with +$750m currently deposited to date.

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 better rates, Morpho preserves the same user experience, the same liquidity, and the same parameters as the underlying lending protocol.

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

Security

Morpho takes security very seriously. The protocol adds extra lines of code compared to a lending pool alone. However, the top audit firms worldwide performed more than 20 audits to limit this additional risk. Morpho Labs team also formally proved part of the protocol in a Yellow-Paper and with the help of Certora.

In more detail:

Why lend into Morpho?

  1. Morpho utilizes AAVE’s liquidity and has built a custom engine that is set to reduce the inefficient spread between borrowers and lenders, creating a better outcome for both parties. The current P2P APY for DAI is 3.08%. On average, Morpho-Aave V2 is:

  2. 35.4% better than Aave for supplying WETH.

  3. 14.07% better than Aave for supplying  DAI.

Morpho matches users Peer to Peer using a matching engine by having a peer-to-peer priority queue, with larger positions getting priority to save on gas costs and ensure maximum matching capacity

  1. In addition, Morpho currently offers liquidity incentives in the form of the $MORPHO token, which is distributed based on liquidity provided to the protocol across multiple “ages” of 3 months subdivided into claimable epochs via Merkle Tree reward distribution. The MORPHO token is not transferrable as of now

  2. Finally, using Morpho incur no fees

    This would vastly outperform Olympus' current yield inside the DSR.

Proposal

Lend $500k worth of Treasury funds into Morpho-Aave-V2 protocol to earn increased yields.

Forward-Thinking Considerations

As we saw in the past, sometimes all the audits in the world don't matter if the contracts get continuously upgraded after the audits. The Mopho team would like to insist on the fact that the current live AAVE-v2 market will not receive any further major changes, meaning all audits are and will stay up-to-date.

Still, we think alongside the Treasury Team that $500k is an appropriate size to be deployed until the protocol reaches further maturity. This does increase our confidence but we still think 500k is an appropriate size to start with.

Useful links & metrics

Happy to answer questions, should you have any.

    0xloth hello ser, first thank you for the well written and detailed proposal, but it’s unclear from the RFC if $OHM will be listed as a collateral/ borrowable asset on Morpho if this proposal is passed. Do you mind clarifying?

        might be worth checking what the utilization on existing borrowing/lending protocols is before putting up more capital.

          streetjesus Gm sir,
          Thanks for your comment. It's not part of the proposal to add $OHM as collateral on Morpho-Aave v2. As explained at the end, we're trying to minimize additional changes to the protocol as much as we can. However, anyone can propose the addition of new collateral on the Morpho Forum here

            z_33 Hey, thanks for your comment. Great point, it can be checked here.
            Currently, the DAI market is 102% utilized with $21.19M supplied and 20.73M borrowed. So basically anyone borrowing more than 460k would match Olympus P2P

              streetjesus Morpho only aggregates AAVE liquidity, there is no way to list $OHM on Morpho.

              This is simply about deploying an initial 500k DAI into Morpho to earn extra yield. 🙂

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