Introducing Moonwell MetaMorpho Vaults: Next-Gen DeFi Lending

[BlockAnalitica]

Hello Moonwell community,

We are thrilled to introduce a collaboration opportunity between the Moonwell DAO, Block Analitica, B.Protocol, and Morpho that has the potential to revolutionize the lending landscape on Moonwell. By leveraging Morpho’s cutting-edge Morpho Blue protocol, we aim to bring the next generation of optimized lending vaults to the Moonwell ecosystem, offering users unparalleled capital efficiency, flexibility, and risk management.

Morpho Blue

At the heart of this initiative lies Morpho Blue - a trustless, immutable, and non-upgradable lending protocol that pushes the boundaries of what’s possible in DeFi. With a remarkably lean codebase of under 650 lines of Solidity, Morpho Blue minimizes potential attack vectors while maximizing capital efficiency and flexibility.

Key benefits of Morpho Blue:

• Immutable: Morpho Blue is not upgradable. The protocol will run and behave the same way forever.
• Governance-minimized: Morpho Governance cannot halt the operation of a market or manage funds on users’ behalf, nor does it impose specific oracle implementations.
• Flexible: Permissionless market creation, externalized risk management, and developer-friendly architecture
• Efficient: Higher collateralization factors, improved interest rates, and low gas consumption
• Isolated: Unlike Compound v2 and Aave v2 + v3, Morpho Blue’s lending markets are isolated, enabling safe support for long-tail assets on Moonwell

MetaMorpho Vaults

MetaMorpho, built on Morpho Blue, is an open-source protocol for creating permissionless lending vaults. These ERC-4626 compliant vaults accept deposits and intelligently allocate funds across Morpho Blue markets, with each vault tailored to a specific risk profile.

MetaMorpho’s key differentiators:

1. Fully transparent, non-custodial vaults with immutable logic and onchain allocations

2. Flexibility to lend across Morpho Blue markets, each with unique parameters

3. Permissionless vault creation, democratizing access for risk managers

4. Layered risk management via clearly defined vault roles:

   • Owner: Sets high-level vault strategy and assigns roles
   • Curator: Defines vault boundaries (markets, supply and borrow caps)
   • Allocator: Dynamically optimizes yield within set boundaries
   • Guardian: Provides oversight and can veto pending actions in timelock

This robust role-based system enables continuous optimization and risk mitigation, empowering vaults to deliver the best risk-adjusted yields to depositors.

Benefits for Moonwell users:
Earn higher yields through optimized lending strategies, including MORPHO rewards
Choose from vaults curated to your specific risk appetite
Enjoy peace of mind with battle-tested, transparent risk models
Potential to create isolated markets for long-tail assets that may be too risky for the existing Moonwell markets

About Block Analitica

Established in 2018, Block Analitica is a dedicated risk management firm with extensive experience working with several communities in the DeFi ecosystem. From company launch until today, we have served as the risk management service provider for MakerDAO, where we assist in the management of a risk-mitigated portfolio of collateral backing Dai. Over the course of our years of successful operation, we have expanded our services of bespoke dashboard development and risk consulting to a variety of protocols, including Morpho, Spark, Compound, Aave, Ajna, BadgerDAO, and Delv (Hyperdrive).

Since November 2023, Block Analitica and B.Protocol have collaborated as Morpho risk curators, enabling the Flagship ETH, USDC, and USDT Metamorpho vaults, with over $52.9 million in deposits. We have also developed the Morpho Analytics Dashboard to help enhance the risk management and user experience of our curated vaults, as well as the broader Morpho Blue ecosystem. We regularly use the Morpho Analytics Dashboard to monitor risks, review relevant parameters, and alert and present important market changes.

Since March 2024, the Block Analitica team – acting as members of the Stability Advisory Council at MakerDAO – have helped onboard and manage the Morpho Spark DAI Vault. We produced the initial MetaMorpho integration risk assessment, and are actively involved in assessing vault risks, managing vault parameters and allocations, and proposing MakerDAO Morpho D3M parameters.

About B.Protocol

B.Protocol has been building open-source protocols and infrastructure for risk mitigation and assessment for the DeFi ecosystem since 2020. Through our research arm, RiskDAO, and its novel risk framework, we have supported over a dozen DeFi protocols with risk analysis, research, audits, and monitoring.

With a focus on automating risk management processes in DeFi we have developed the Risk Oracle and SmartLTV formula to set and monitor risk parameters for lending platforms in a transparent way, building the next generation of DeFi risk management infrastructure.

To mention some of our latest development, we have introduced an open source algorithm for optimizing DEX liquidity aggregation, built a Risk Level monitor for the MetaMorpho Flagship vaults we co-curate with Block Analitica, and lately implemented an auto-Allocator for the flagship vaults, creating the first fully automated smart contract risk manager in the DeFi lending ecosystem.

Our Proposed Moonwell MetaMorpho Vaults

Block Analitica and B.Protocol propose to leverage our deep risk expertise and knowledge of the Morpho Blue and MetaMorpho protocols to curate a series of optimized MetaMorpho vaults in collaboration with the Moonwell DAO.

Initial vaults will support USDC and WETH, making optimized yield generation effortless for Moonwell users. Our proprietary risk models, stress-tested in production, will power dynamic allocation across Morpho markets to deliver the best risk-adjusted returns with enforceable onchain risk limits.

Moonwell’s MetaMorpho vaults can be made accessible through the Moonwell application and will be as easy to use as current Moonwell markets.

For Moonwell’s MetaMorpho vaults, we suggest the following role assignments:

• Owner: Moonwell DAO
• Curator: Block Analitica & B.Protocol
• Allocator: Block Analitica & B.Protocol
• Guardian: Moonwell Security Council

Additional information regarding MetaMorpho vault roles can be found in the Morpho Docs.

Next Steps

Pending community approval, here’s a high-level overview of our potential launch plans:

1. Snapshot vote to gauge initial support from the Moonwell DAO

2. Onchain Moonwell Improvement Proposal vote to:

   • Accept Moonwell DAO ownership of USDC and WETH MetaMorpho vaults and the following markets:
     • cbETH/WETH, wstETH/WETH, rETH/WETH
     • WETH/USDC, wstETH/USDC, rETH/USDC
       • Note: Morpho has already created a cbETH/USDC market
   • Set the vault roles as mentioned above.
   • Distribute a grant of initial WELL liquidity incentives

3. Vault integration into the Moonwell app for seamless user experience

4. Go-to-market push, in collaboration with the Morpho team, to drive awareness and bolster liquidity

We believe this collaboration can set a new standard for optimized, risk-conscious DeFi lending. By combining Block Analitica and B Protocol’s risk management expertise, Morpho’s powerful MetaMorpho framework, and Moonwell’s ecosystem scale and intuitive interface, we can attract substantial new capital and users.

We eagerly await your feedback and the opportunity to bring this vision to life. Let us know your thoughts and questions below!

/ Block Analitica and B.Protocol teams

[Luke]

Thank you for submitting this important proposal. I have been researching Morpho Blue for the last several months and I’m inspired by the simplicity and power of it’s design and architecture. Morpho Blue is an incredible lending primitive that combines the safety of isolated markets, which reduces the risk of a single bad collateral asset causing losses to all lenders, with the flexibility of MetaMorpho vaults that enable borrowable assets to be shared between multiple isolated markets.

Morpho Blue is also immutable and non-upgradeable, so we can have confidence that markets created with it will operate forever. The code is only 650 lines and has been formally verified twice, and the Morpho team includes some of the world’s best Solidity experts.

This could be a very powerful partnership and could help Moonwell update it’s technology stack to include the latest cutting edge isolated market primitive, which would enable a number of key benefits:

• The Moonwell protocol could earn more revenue/fees through performance fees earned by vault curators.
• Moonwell could consider launching riskier assets, such as SocialFi, meme coins, and other assets on Base, without introducing risk to the current “blue chip” markets.
• Moonwell vault suppliers could earn Morpho and Well rewards
• Liquidity built in the Morpho vaults would be more broadly useful to the entire Base ecosystem, rather than being only useful to Moonwell borrowers. As Coinbase and others move more and more products onchain, this deep liquidity can be useful in many ways.

Morpho would benefit from having the best product experience available today:

• Smart Wallet support and a beautiful frontend app with a mobile experience, ready to capture the enthusiasm and onboard millions of new users during onchain Summer.
• USDC Anywhere, a cutting edge feature that helps you onramp USDC from the top Ethereum networks
• A strong community with over 40,000 active users on Base, and thousands of Well token holders participating in onchain governance.

The team at BlockAnalitica and B.protocol are the best MetaMorpho vault curators, and have built LTV automation that helps to keep their vaults safe, and their approach to conservative risk management closely aligns with the Moonwell communities’ approach to prioritizing safety and security of deposits.

I’ve been in the DeFi space for almost 6 years now (since late 2019 when I was collaborating with Compound during a Coinbase hackathon), and I’ve seen how the power of composable protocols can benefit multiple communities. When strong protocols build on top of each other, 1+1 = 3 instead of 2. DeFi is not a zero-sum game, as Morpho builds liquidity, Moonwell stands to gain just as much as the Morpho protocol does, and the entire ecosystem will flourish as Coinbase and their customers move their $350+ billion digital assets onchain, Moonwell and Morpho will be ready to grow to previously unseen levels of TVL. I couldn’t be more excited about this potential partnership.

[mason]

Delegated - good luck!

[monet-supply]

Hi all,

This is monetsupply posting on behalf of Block Analitica and B Protocol. We just wanted to let you know the snapshot vote for the above proposal is now live, and will be ongoing for the next 3 days!

https://snapshot.org/#/moonwell-governance.eth/proposal/0x8d297b61bdc0361c3ff9d26f591b2758c7d6c821b61ee98788b51927cb613051

[0xrobinhood]

Gggggn! Morpho

Thanks for your proposal!

It is very interesting and i would love to hear more about your background and connection to moonwell…perfect match ?

As a Moonwell community member can you share:

• benefits for $Well stakers
  -benefits for base suppliers
  -moonbeam suppliers

Awesome to have you onboard just share a bit if /alpha/ with us​:sunglasses:

Nice wknd👐🏻
Kevin

[mason]

i know you! we met at a rooftop in paris

[0xrobinhood]

Me ? In paris ? Are you Kate ? i was with Kate in paris

[0xrobinhood]

It sounds cool but i was never at a rooftop in paris (without kate )

[monet-supply]

Hello! Thanks for your questions.

Benefits for $WELL stakers

• The vault will generate TVL from suppliers in the vault and borrowers in the relevant pools
• Moonwell will receive fees from the Metamorpho vault based on a percentage of interest earned
• The vault has strong risk management infrastructure which should reduce or eliminate the potential for Moonwell to face protocol losses

Benefits for Base suppliers

• Suppliers on Base will have another option for supplying their assets within the Moonwell ecosystem in addition to the existing market
• Some existing or new users may prefer the features and risk/return profile of the Metamorpho vaults, leading to supply growth and user acquisition

Benefits for Moonbeam suppliers

• As far as I’m aware Morpho is not currently planning to deploy on Moonbeam, so no direct change for Moonbeam suppliers
• Users on Moonbeam have the opportunity to move funds to Base to take advantage of the new vaults
• Protocol growth and revenue from the vaults may help improve overall conditions in the Moonwell ecosystem, which can passively benefit other deployments/chains

Let me know if you have any other questions!

monetsupply on behalf of BA Labs

[0xrobinhood]

GM Monet

thanks for the whole list! very helpful! I appreciate it when people take so much time

you have my vote! 🫵🏻😎

I see you have a points program for users, wouldn’t it be worth considering involving the moonwell community?

think you know what I mean

maybe we can generate a new hype together on base chain be a community member and you will receive an airdrop

Again, many thanks to your detailed answer

Enjoy your W-end guys

[basecrypto]

Looks very promising MetaMorpho vault on Moonwell, cant wait to try this great improvement into Moonwell tools. Will follow this update and delegated

[elliot]

I am strongly in favor of this proposal!

If passed, it would be a win-win for both Moonwell and Morpho as it combines the strengths of the Moonwell’s product offering with Morpho’s lending primitive.

Having reviewed Morpho’s V1 and V2 codebases and seen their performance across multiple years, I can attest to the quality of their world class engineering team.

Their team has also done security due diligence including but not limited to:

• formal verification in two different formal verification languages
• fuzz testing
• unit testing
• integration testing
• rigorous specification reviews
• intense internal security reviews
• multiple audits

With all of this in mind, I feel comfortable voting yes on this proposal, as it cements the Moonwell DAO as a key player in this new ecosystem on Base.

[monet-supply]

Hi everyone,

Just want to share that the onchain proposal is now live, and voting period lasts for the next 3 days: Moonwell - Lending made simple

[Metabowlist]

Thanks for submitting this proposal!

I’ve been diving into the proposed collaboration with Morpho, Block Analitica, and B.Protocol, and I’m genuinely excited about the potential impact it could have. Bringing Morpho Blue and MetaMorpho vaults into the ecosystem could redefine lending on Moonwell.

The robustness of Morpho Blue’s immutable and non-upgradable design, coupled with its concise codebase and formal verification, instills a high level of confidence. And knowing that experienced teams like Block Analitica and B.Protocol will handle curation and allocation, with oversight from the Moonwell Security Council, adds an extra layer of reassurance.

The role-based management system of MetaMorpho vaults promises optimized yields and effective risk management. This could open up new avenues for handling diverse assets safely, potentially creating exciting opportunities.

The prospect of seamless integration into the Moonwell app is particularly promising. It’s a user-friendly approach that could attract more participants and capital, bolstering the entire ecosystem. I appreciate the community involvement through Snapshot votes and on-chain proposals to ensure everyone’s input is valued.

Overall, this collaboration signals a significant step forward for Moonwell and could pave the way for innovative developments in DeFi lending.

Cheers,
Metabowlist🌙

[kimchiblock]

I have voted “for” and personally looking forward to onboarding such a quality service be available to Moonwell users. I personally like the possibility of utilizing riskier assets without the potential harm on the protocol security. Deepening the liquidity on Base is what we really need to do to become the leading lending protocol on Base (and hopefully across the Super chain).