Morpho is an open, efficient, and resilient platform that allows anyone to earn yield and borrow assets. At the same time, developers or businesses can create markets, curate vaults, and build a range of applications on its flexible, permissionless infrastructure.

There are several ways to use Morpho:

• Through the Morpho interface (guide available here)
• Through any app of the Morpho ecosystem
• At contract level, through Etherscan for instance (guide available here).

Morpho is committed to use industry-leading security practices. Yet, there are still a number of risks associated with the use of Morpho that users must be aware of. You can find the detailed risks in the documentation here and here.

Although there is no such thing as zero risk, Morpho is known for its industry-leading security practices and follows a multi-faceted approach to security, including tier 1 audits and a $2.5M bug bounty.

An article dedicated to the Morpho Security Framework here and the practices are detailed in the documentation here.

These various measures should not prevent users from carrying out their own research and assessing associated risks.

Morpho is non custodial, permissionless and immutable. The Morpho Protocol can not freeze your assets in any way.

You can deposit crypto asset in a Morpho Vault on the Morpho interface (how to in this guide) or by using an app from the Morpho ecosystem.

A Morpho Vault APY (what suppliers earn) is not fixed and may fluctuate over time based on market conditions. The NET APY can be broken down into:

• The Native APY, from interest paid by borrowers. It will depend on the utilization rate of the underlying Morpho markets (supply and demand).
• The rewards APR, any rewards provided by third parties to a Market or a Vault for a limited period of time.
• The MORPHO rewards APR voted by the Morpho DAO.

The choice of a Vault depends on the user’s risk profile and priorities. There’s several criteria to assess which Vault is right for you:

• Who is the curator? What’s their track record and expertise ?
• What risks is the Vault exposed to? Assess the markets it allocates to as some may be seen as riskier than other (collateral exposure, LLTV, Oracle, etc.).
• The curator’s performance fee.
• Current and historical Net APY (interest generated and rewards).

Along with general risks associated with Morpho, using Earn has specific risks including:

Bad debt risk: There is a risk that a position’s collateral value falls below the borrowed amount before it can be liquidated leading to bad debt. In such cases, the bad debt is shares the losses proportionally among the lenders.

Liquidity risk: There is a risk that all liquidity is borrowed. In this case, you might not be able to withdraw your assets right away. Instead, you will have to wait until new liquidity is available.

Vault risk: Key roles within a Morpho Vault wield significant power, impacting user interests. When investing in a Morpho Vault, it is important to conduct thorough due diligence on the vault’s settings and its allocation strategy, as well as to stay up to date with its changes.

Read more about the risks here.

You can withdraw your supplied assets at any time provided there is enough available liquidity.

Watch this tutorial video to learn how.

Morpho is an over collateralized lending and borrowing protocol. To borrow assets, you need to deposit more collateral than what you want to borrow.

You can use the Morpho borrow page or any app of the Morpho ecosystem.

On the Morpho borrow page, you will have to choose the market that suits your need and proceed as explained in this video tutorial.

Morpho allows permissionless market creation with any ERC20 token as collateral and loan asset. You can borrow any ERC20 provided a market has been created and there is available liquidity.

Each Morpho market has a specific and fixed LLTV (Liquidation Loan To Value) parameters. It is minimum value of collateral required relative to the borrowed assets. For example, if this ratio is 90%, the value of borrowed assets must not exceed 90% of the value of the collateral, or the position is eligible for liquidation.

The amount you can borrow is therefore directly linked to the value of your collateral and the LLTV of the market.

Interest paid by borrowers is determined by the Interest Rate Model (IRM).

Morpho can support any IRM but currently all markets use the same AdaptiveCurveIRM.

This IRM autonomously adjusted the rates based on a target ratio of borrowed over supplied assets, commonly known as utilization.

You can see on the Borrow page or on a specific market page current and historical Borrow APY.

Along with general risks associated with Morpho, using Borrow has specific risks including:

Liquidation risk: Each Morpho market has a fixed Loan-to-Value (LLTV) limit. If your position’s value goes beyond this limit, your assets could be liquidated. When borrowing on Morpho, it’s important to choose the right market and regularly monitor your position to avoid liquidation. Learn more here.

Oracle risk: Each Morpho market uses an oracle to track prices, set when the market is created. However, some oracles may be susceptible to price manipulation, which can cause liquidations or bad debt.

Some oracles are more reliable than others. When evaluating an oracle, consider its security, reliability, and how often it updates prices, especially if it’s centralized.

Read more about the risks here.

You can repay borrowed assets at any time provided you have the required asset in your wallet.

You can see this tutorial video to learn how.

By default, collateral assets do not earn a Supply APY on Morpho as they are not lent out to borrowers. This alleviates the liquidity constraints for liquidations faced by other lending platforms and allows Morpho to offer higher capital utilization.

Liquidation is a mechanism to mitigate the risk of bad debt and protect lenders’ capital. When an account becomes unhealthy, meaning its Loan-To-Value (LTV) on a given market exceeds the market’s Liquidation Loan-To-Value (LLTV), the account’s position can be liquidated.

Liquidation is permissionless on Morpho, anyone can perform a liquidation by repaying the account’s debt in exchange for the equivalent amount in the market collateral asset, along with an incentive.

The Health Factor is a measure of the collateralization level and represents the state of a borrower’s position.

The higher the health factor, the safer the position from liquidation. When the health factor reaches 1 or less, the position becomes eligible for liquidation.

Health factor is visible on users’ position in the Morpho interface and has to be carefully monitored to avoid a position becoming unhealthy and facing liquidation.

The liquidation price is the price of the collateral at which one’s position will become eligible for liquidation.

Liquidation price is visible on users’ position in the Morpho interface and has to be carefully monitored to avoid a position becoming unhealthy and facing liquidation.

You can avoid liquidation by keeping the health ratio of your position above 1. If necessary either by:

• depositing more collateral
• repaying partially or fully your debt

Health Ratio and Collateral Liquidation price are key informations to monitor to ensure your position stays healthy.

Morpho Markets are simple, immutable lending markets containing 1 loan asset and 1 collateral asset. Each market has its own interest rate. Markets can be combined to support any type of risk profile or use case.

Morpho Vaults are curated lending vaults that can allocate deposits to any number of Morpho Markets. The rate of each vault depends on which Morpho Markets it allocates to. Each vault is customizable and has a different risk profile.

Morpho Markets and Morpho Vaults creation is permissionless, anyone can deploy a market or vault. However, setting the various immutable parameters for a well functioning market, or curate risk using a Morpho Vault, is no trivial task, and requires specific knowledge and appropriate tools.

Since anyone can create markets, there are many options, making it hard to choose the appropriate ones and know when to change your position if the market changes.

Morpho Vaults simplify this by automatically allocating deposits and adjusting them according to a set strategy, making it easier for you to earn without worrying about these complexities.

Curators are independent, third-party risk experts who use their expertise to offer various Morpho Vaults.

Morpho is permissionless so anyone can build on its open, efficient, and resilient infrastructure.

Morpho’s flexible infrastructure can support almost any use case.

Whether you’re building an earn product, structured products, yield aggregators, or any other use case that requires lending or borrowing, Morpho can do it.

You can find more technical information in the Morpho documentation and the Morpho Github repository.

If any questions, jump in the Morpho discord and we will be happy to support!

The Morpho Protocol is governed by MORPHO token holders through procedures, voting, and execution, known as Morpho Governance.

The more MORPHO tokens held, the more voting power one has.

You can read more about Governance here.

Anyone can participate in the discussions on the Morpho governance forum.

However, to vote you will need to hold MORPHO tokens or have someone delegating their voting power to you.

You can read more about the MORPHO token and delegation here.

Voting takes place on Morpho Snapshot.

Proposals and discussions can be done on the Morpho governance forum.

Participation in Morpho’s governance is not mandatory. However, the entire community is invited to participate both in governance and in the development of the Morpho protocol.