DeFi
Morpho topples Compound to become second largest DeFi lender on Ethereum – DL News
- Morpho has surpassed Compound in total value borrowed on Ethereum.
- The innovative approach of matching peer-to-peer borrowers and lenders offers attractive rates to Morpho borrowers.
Morpho just surpassed the historic lending protocol Compound on Ethereum in terms of total borrowing value. In terms of Total value of crypto assets deposited, however, Morpho still has an uphill battle against Aave and Compound.
Cross Morpho $903 million in total value borrowed as of February 7, exceeding the $865 million in total value borrowed on Compound, according to DefiLlama data.
Since its inception, DeFi lending has been dominated by two protocols – Aave and Compound – which operate similarly to each other.
Users deposit funds into a lending marketplace from which other users can then borrow, for a fee. Morpho works similarly, but it also matches users where possible, providing better rates to borrowers and lenders.
Although Morpho leads the table in total borrowing value, the protocol ranks sixth among the top lending protocols in terms of total value of crypto assets deposited.
Total investor deposits into Morpho ($)
Aave currently has over $7 billion in total crypto assets, and Compound has over $2.2 billion, while Morpho still only has $1.6 billion.
What makes Morpho different
Typically, with lending protocols, lenders will deposit their assets into a lending marketplace from which users can borrow.
While this method is popular, one of the drawbacks is that all money deposited into a lending market remains inactive, meaning that a majority of the capital in these pools is not actively lent out and therefore does not generate yield.
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Morpho is built on top of Aave And Compound he can therefore benefit from the same rates and assets within both protocols. But it also tries to connect users peer-to-peer to reduce the amount of unused capital and offer more attractive borrowing rates.
When a peer-to-peer match cannot be achieved, it is simply routed to the underlying lending markets; Aave or compound.
This creates a scenario for Morpho users in which, at worst, they will receive the same rates as in a conventional lending market, or at best, they will receive the enhanced peer-to-peer rate.
Rates for DAI, a popular stablecoin, on Compound are 5.75% for lenders while borrowers pay 8.34%. On the other hand, the rate for borrowers and lenders when matched peer-to-peer on Morpho is 6.61%, which is better for both parties.
While this may not seem like a big increase, for investors with a lot of money, often called whales, these percentages can mean a lot. If a user opened a $10 million loan for the DAI stablecoin and held it for a year, they would save over $173,000 using Morpho.
Users are also rewarded with MORPHO tokens, but these tokens are strictly used for governance as they cannot be traded.
These tokens could have financial value in the future, as Morpho documentation indicates that token holders can vote to enable trading at any time.
Ryan Celaj is DL News’ data correspondent based in New York. Contact us with advice at ryan@dlnews.com.