Morpho 如何穿越熊市，并刚刚为 DeFi 推出新的固定利率市场

1. Closing

On the institutional side of things, leverage exists a lot, right? It’s not just a crypto thing, obviously. For them, it’s a sine qua non condition: they would never use leverage on a variable-rate construct. They would always use a fixed rate because they want control. Those institutions are very serious; they have quants, and they want to control their risk, their downside, and their upside. Midnight allows them to control that, right? This is what we’re very excited to have those guys use the protocol for.

Paul, thank you for joining us. How are you doing?

Yeah, I’m good. Thanks for having me, guys.

Paul, we were chatting before we went live that this is your third time on the podcast. I actually just looked it up while we were talking. Our first podcast together was November 1, 2023. This was before Morpho Blue went live. I think it went live a few months later or something like that.

I remember talking about Morpho Blue and thinking, “Wait, how does it work?” I was trying to conceptualize what you guys were building because it was very novel and new. We then spoke again—it was July 17, 2025, not even 2 years later—and it was really crazy just to look back at that podcast and see what you’d built since Blue went live.

2. How Morpho managed to beat the bear market trend

Today, for the third time, we’re going to be going over Morpho Midnight, but also all the progress you guys have achieved since we talked to you a year ago, which is nuts. Maybe let’s start with that, Paul. It’s been a pretty brutal bear market for a lot of people. I would say there’s a very short list of teams that have performed well in the bear market, but Morpho is one of those teams that I feel has continued to perform throughout it. There have been new integrations and growth. I think the Coinbase integration has deepened, and we’ve seen Robinhood. We’ll talk about all that stuff later, but what do you think you’ve gotten right? I know that’s a very open-ended question, but how have you managed this during one of our roughest periods in crypto?

I think a few things. There are 2 interesting phenomena around crypto. The first one is that the speculation side of things kind of died out progressively. People were less and less interested in the speculation angle of crypto. They were not able to make as crazy returns as they used to, and a lot of attention was taken away by AI stocks and prediction markets, which took away a lot of the crowd that made the businesses around speculation less profitable.

When the craze died out progressively, you were only left with the technology and infrastructure play. The big question and the big angle are how blockchain technology and crypto can enable real-world businesses. How can it enable financial infrastructure that offers similar services to what we do today, but in a way that is more open and, as a result, more efficient—with better interest rates, lower fees, deeper liquidity, and greater accessibility for everybody?

I think, generally, the projects that have been successful during this period and will continue to grow are the ones that focus on this angle: crypto is infrastructure. Crypto is technology that existing financial services—fintechs, exchanges, banks, and asset managers—will use as their backend, basically.

Unfortunately, it’s very hard to get right because you need to get the product and the technology right and safe, and you also need to get the go-to-market right. That brings me to the second point, which I think was very important over the last year or so: it was not only about building a cool protocol with a cool mechanism design. It was also about making sure that it fit the requirements of the large enterprises that are moving onchain.

The Coinbases, the Robinhoods of the world, and pretty much every other fintech that is now looking at stablecoins are going to move onchain and use DeFi to do a lot of this type of stuff. If you want to survive in crypto now as a project, you have to make sure you can ride this wave and go to market with those players, win the most important deals, snowball on those deals, continue to iterate on your product, and continue to aggregate talent.

To close this thought, the ecosystem has matured. Projects are merging a lot, and a lot of talent is concentrating as well. Over the last year, Morpho has grown immensely from a talent perspective. The team is much stronger because we were able to have all the best talent from all the teams that were not doing so well come and join Morpho. We are now much stronger than we used to be. We operate at a much faster pace and deliver much higher-quality products, in my opinion.

3. Crypto’s greater success as finance infra

I think something I grossly underestimated is that I really believed we could eventually onboard more DeFi users just by using all the DeFi-native wallets, and that it was a matter of having better wallets and easier tools to get onchain. I think what I’ve come full circle to believe is that there’s a very large audience of investors and users who shouldn’t be onchain but should benefit from the yields and opportunities that something like Morpho affords them.

Someone who prefers the customer service and custodial services of something like Coinbase or Robinhood can use those tools for whatever reasons they have. Now they’re starting to get options to borrow, let’s say, through a Morpho vault, or maybe just to lend. I was getting a notification the other day from Coinbase about an increased lending opportunity, which I believe goes back to some of the work you guys are doing.

I wanted to level-set with you: can you remind us what Morpho is currently powering with Coinbase and Robinhood?

Sure. To double-click on what you just shared, I think that was my belief, too. At some point, 5 years ago, I thought crypto was going to build those consumer experiences and abstract away the technology progressively. But the 2 things I’ve learned are that it was much harder than I thought—the account abstraction, gas abstraction, chain abstraction, everything—and that it was easy to copy for someone who already had distribution.

The hard part to replicate was distribution. Naturally, the fintechs and the Web2 companies were able to absorb everything we had learned the hard way over the last few years as an industry and just integrate the technology. I think crypto as a consumer product, in my opinion, has been a failing experiment over the last 5 years. Most of the consumer products that emerged in that way, which were very decentralized and very DeFi-native, had a very hard time.

All those years of learning benefited the large fintechs. This is a core thesis that we have at Morpho: crypto should again be infrastructure. It should be the wires that are completely hidden by those large-scale distributors.

4. Onchain integrations for fintechs like Coinbase & Robinhood

And to your question, today we power the first natural distributors to use the chain: the exchanges. As we were integrated into every wallet 2 years ago, I started thinking, “Okay, where else should we be going?” The most natural destination was the exchanges.

And out of all the exchanges, the most innovative and engineering-forward was Coinbase. They had built their own Layer 2 and everything. I thought we should build loans for Coinbase.

Morpho is basically a yield and loans marketplace. On one end, we allow people who have excess capital to generate interest. On the other hand, we allow people to get some financing. So, the 2 types of products that those fintechs can build on top of Morpho are either a yield product on one end or a financing product on the other end.

The first-ever example in this industry of a widely distributed product powered fully by on-chain rails and DeFi was the Coinbase x Morpho integration, where we got to allow those Coinbase customers to borrow. Today, there are literally billions that are borrowed through the Coinbase app directly on Morpho. The reason why Coinbase decided to do this is that Morpho allows them to access global pockets of capital. They don't have to have their own balance sheet, and they don't have to have liquidity partners.

When you borrow from Morpho, Morpho is going to aggregate all the lenders of the entire universe that want to compete and provide the best rate possible to Coinbase users. They can just come to the Morpho protocol and deposit on the other end. That's extremely powerful for Coinbase to have a very low interest rate today. It's an extraordinary business line for Coinbase. It's working very well, and it's growing very fast as well. It continues to grow quite a lot.

We've extended across a wide range of collateral assets, and we've also extended to the lend side of things, to the yield side of things. To your mention, now Coinbase offers 2 yield products on Morpho. One is low risk and one is high risk—a low-yield, high-yield type of situation—and this allows USDC holders to generate returns on their savings.

So, that's pretty much how the playbook of what we call a DeFi integration happened with Coinbase. This was replicated by pretty much every exchange at this point. We've been integrated into Kraken, Gemini, OKX Wallet, Binance Wallet, and so on.

The next wave, and the most interesting recent one, has actually been, “Hey, how do we integrate into companies that are not crypto-native in the first place?” Companies that don't come from crypto—this is the real challenge. If we want to grow as an industry, we need to get distribution that was not in crypto in the first place, and we want to bring them in because the tech is better.

This is the Robinhood moment, which we announced a few weeks ago, where we're basically going to power Robinhood Earn for them. We launched it 1 or 2 weeks ago, and today it has more than $100 million already in deposits into the protocol. We also announced Deel, which is a new platform that has nothing to do with crypto but will use crypto rails because this is a global platform by definition. There are many other fintechs in the pipeline that I can't share right now, but pretty much everybody's looking at infrastructure on-chain right now.

5. Why TradFi partners like Apollo trust Morpho infra

Yeah. All this is so interesting, and I go back to what you were saying about the insight to integrate with the exchanges at the time you did. I feel like in our industry, a lot of people were playing games like, “Which chain is the best?” But really, there was another higher-level player with these exchanges that had massive distribution power.

I want to just go back to maybe the Coinbase thing and the Robinhood thing. How do you pull something like that off? I'm assuming it's some sort of months-long engineering conversation. Can you give us some insight into how you get these deals done? To us, who aren't on the inside, it looks like incredible BD. We know the tech has been battle-tested, but what is working, I guess, for the Morpho pitch that maybe we might not realize?

Yeah, it's a good question. So, to your point, yes, those are very long conversations, in the order of magnitude of a year for each one. Whether that's the Coinbase integration, the Robinhood one, or the partnership with Apollo, those are usually very long conversations. It's high-touch business development in some capacity.

I think, at the end of the day, what truly made the Morpho value proposition convincing comes down to 2 things: Morpho is a piece of code and a network. We provide people with a way to automate their loan and yield products, and we connect them to a global network.

What that means is that, on one end, they can have control over exactly the type of yield and loan that they want to do. In Morpho, you can control your code. Morpho can't change the code for you. You own the piece of code because the code is immutable and no one can change it. You own the risk, you own the compliance. If you want to put some compliance gates in place, you can. If you want to change the collateral asset or the oracle, you can. You own your fees.

That's the code side of things, which provides you control over the financial product you're distributing. That's new for fintechs. Fintechs own distribution; they don't usually own the financial infrastructure. Crypto is enabling them to do that, but usually they rely on TradFi. They don't have this level of customization. They just offer the latest ETFs or those kinds of things.

The second part of the value proposition is the network. We are globally connected financial infrastructure, which allows us to source opportunities for their clients in a global and open way, which means in a competitive way. When people see the retail distribution of Coinbase coming on-chain to borrow, now you have all the lending side that can come in and compete fiercely to provide Coinbase users the best rate possible.

Think of Morpho as this sort of aggregator that's going to make sure that you're globally connected, and as a result, you get the best risk-return for your given ask.

6. The importance of Morpho being credibly neutral

Hey Paul, something I've been thinking about just watching this play out with Coinbase, Robinhood, and all these other integrations: I know you guys are this neutral infrastructure layer, but sitting in the middle of maybe 2 competitors, like Coinbase and Robinhood, does that cause any tension with Morpho at all? Or do you just look at it like, “Hey, look, we're neutral infrastructure. We're going to work with you, we're going to work with you, and we're going to work with everybody who's the best”?

Yeah. Morpho wants to become the open credit network for the world. So, we're not looking at this from, “Oh, this is Robinhood, this is Coinbase, this is Crypto.com,” et cetera. What I'm looking at is the $200 trillion credit market, and I want all of it on Morpho.

The only way for me to credibly achieve connectivity between every lender and every borrower is, of course, to be credibly neutral. The good thing about Morpho is that you don't have to take my word for it. The piece of code is the piece of code. It's fully immutable. You can configure the product you want out of it.

It does not matter if a company has some tokens in the project. It doesn't even matter if I prefer one company or one person over the other. The code can't change. You control it, and that control is part of the value proposition. That's what makes the product appealing for those players, even though some of their competitors may use the network.

The way one should think about Morpho is Visa for credit. Every bank in the world is using Visa because they need global connectivity. In some capacity, the more distributors we have, the better the product becomes. The more distribution we get from Robinhood, inevitably, there are arbitrageurs—even though they're on 2 different chains—and automations between different chains.

You end up with better liquidity, better depth, and better interest rates on Coinbase because of the presence of Robinhood. Or because Kraken Earn is depositing on Morpho or borrowing on Morpho, you end up with better interest rates on the Robinhood or Coinbase side of things.

That's truly what this is about: the product works better if we're maximally connected. In order to be maximally connected, I don't have a choice but to be credibly neutral. This is something we've never, ever compromised on from the very early days.

We've been clear with the Coinbase team, with the Robinhood team, and with every other partner that we've worked with: we're going to work with everybody because our mission is to globally connect credit. It's a good thing for you because we're going to be able to offer the deepest liquidity and the best interest rate as a function of that for you.

No one would want to partner with Visa if Visa were not connected to the rest of the world.

7. The evolution of curators to underwrite billions of people

It's the same thing.

I think another topic that's been discussed a lot on the podcast lately has been around the institutionalization of DeFi, just the fact that DeFi is growing up. We just had on Johan IDE from Chainlink Labs, and he described it as, “DeFi is now entering its big-boy era,” which I love.

One of the important next steps in that has been the role of curators. I feel like the way that Morpho allows us to ultimately segregate risk and create the different vault opportunities has been a big stepping stone in terms of bringing more serious capital on-chain.

A part of that has been observing who those curators are. Many of those curators—I want to say, despite a number of them having impressive backgrounds and credibility to come into the space—I viewed many of them as DeFi native. I think everyone knows Steakhouse; they've been a pioneer in the space and clearly are doing amazing work in terms of what they offer through the integrations with Coinbase, and I believe they're also powering the work with Robinhood.

We also know teams like KPK, which I think are at the forefront of risk management and automation there. That all said, despite how much respect we have for players like them, we are seeing more traditional players come into the space, or maybe folks who sit between TradFi and crypto, like Bitwise and Galaxy. My understanding is that they are becoming curators.

So what are your thoughts on the evolution of the role of curators in Morpho? What is next? How do you continue to grow trust from institutions so that more capital can come on-chain, so that when they tokenize their traditional assets—what happens when they start tokenizing trillions, bringing that on-chain, and want to bring that into Morpho's infrastructure?

So I guess the TL;DR is that, yes, the landscape is going to change massively. The way I like to think about it is that DeFi protocols should not operate the financial services. DeFi should be a pure piece of code, a pure protocol, and externalize any operations to the so-called curators. This was the basic idea of Morpho Blue, and we'll talk about it in a second, but with Midnight, you have the idea that we're externalizing not only the risk management but also the rates and the term.

Once you have this in place, you need those asset managers or operators—curators—to come in and do the hard work of the underwriting, right? And just like in traditional finance, we are looking to underwrite 8 billion people, right? That deserves credit. We need to find someone that can believe in them, that can underwrite them, right?

The only way to achieve this is by having an army of thousands and thousands of curators that are going to look for people who have ambition, who need financing, whatever the way they collateralize, et cetera, and are going to fund them in a globally connected way with the best possible interest rate, thanks to the Morpho network.

And so what that means, if we want to achieve that mission, is that we're going to need to step away from the purely crypto-native type of loans, and we're going to need to progressively enable broader sets of loans, right? Allow people who have different kinds of ambitions and different types of obligation contracts to be able to get funding in the Morpho network.

So the next natural step is, like, how do you get RWAs as collateral, or stock tokens as collateral, or receivables as collateral? And progressively, you can extend, right? But obviously, the current crypto-native vault operators, which are mostly crypto-native, don't necessarily have the knowledge to underwrite this stuff.

Basically, 2 things are happening. Vault curators are evolving into those financial institutions themselves. They're either learning new ways to underwrite or becoming more institutional themselves. So that's 1 way. But you also have the other side joining: the actual institutions coming on-chain directly, and those financial institutions starting to run vaults. Those more traditional asset managers are moving on-chain.

As this happens, it's pretty clear that now we're going to reach a state of maturity of the infrastructure where the largest asset managers in the world, which are worth trillions of dollars of AUM, will start using the chain as go-to infrastructure in order to manage assets. When this happens, this is the next inflection point for DeFi.

The last few months and years have been a little bit bearish in terms of momentum for the ecosystem, but I can't get more excited about what's ahead of us, because I think we've done all those years of long building and we're nearly there—the moment where we've been talking about institutions coming on-chain for many years.

Everybody knows that they're coming now, that they're serious about it. But everybody has been building proof of concept for the last few years. No one has built an actual on-chain business case that can truly leverage DeFi to make a multibillion-dollar business, for example. And we're very close. We're just a few months away. My guess is less than 6 months, right?

It's never been the case in the history of DeFi. I know because we're making this happen at Morpho, and this is our big focus. So I'm very optimistic about the future of DeFi in general thanks to that.

I totally agree with what you're saying about how it has almost felt like a bit of “the boy who cried wolf” with institutional adoption coming. The past few years, we were like, “Yeah, it's coming,” and then a year ago, “It's coming,” and now we're saying, “It's coming,” but believe me, it really is coming this time. It's happening.

8. Introducing Morpho Midnight and the problem it solves

I want to get into Morpho Midnight now. As we alluded to earlier, we spoke to you before Morpho Blue launched, and it was totally revolutionary. Now Morpho Midnight is launching, and we just want to learn from you: what problem is this solving?

I want to phrase the question for DeFi and for on-chain, but we're now talking about what problem this is solving for the world, which is kind of a crazy inflection point, like you mentioned. So what is this solving for the world? We're stepping up past DeFi now.

Yeah. So first, thanks for mentioning that Blue was such an important step for the industry. I actually think Midnight is by far, by far the most ambitious project we've ever built—that I've ever built in my life. It took us 2 and a half years to get there. Obviously, I'm biased, but I think it's the most ambitious thing DeFi has ever seen.

The reason is simple: we basically created this obligation platform where we allow people to do lending and borrowing, just like Morpho Blue, but this time they have control over the risk, but also over the rates and the terms, right? This little nuance—I'm going to elaborate in a second—changes everything: everything in terms of institutional adoption, consumer adoption, liquidity fragmentation, marketing, everything.

So, what is Midnight about? Midnight is a fixed-rate, fixed-term, intent-based lending and borrowing protocol. It's just like Morpho Blue, an infrastructure that lets you lend and borrow, except this time the rate is fixed and the term is finite, right?

When you create a new Morpho Midnight market, you do the same thing. You have a list, you have 1 loan asset, say USDC, for example. You have some collateral asset—it could be multiple collateral, just 1 collateral, et cetera—and this time you have a maturity, right?

Think of it as an obligation. Just like in traditional finance, you have an obligation, and this obligation can be traded, right? The price of that obligation is the interest rate that you're going to have to pay as a borrower or that you're going to earn as a lender.

In some capacity, this construct is actually much closer to TradFi than anything that has previously been built in DeFi. It's funny that we end up there. But with this construct, we basically unlock 2 major use cases at a high level: we unlock predictability, and we unlock control.

Obviously, with a fixed rate, you're going to know what you're going to pay. It's important for large-scale consumers. It's some of the most important feedback that we get when we integrate borrowing products into large-scale consumer apps: people want to have predictability.

That's great. That's not a zero-to-one improvement. That's a good improvement compared to what we had. The true zero-to-one improvement is giving the ability for those asset managers that we were talking about to actually fully control the risk by giving it a price.

In Morpho Blue, in DeFi before, the rate is determined by the protocol. In Morpho Midnight, the rate is determined by the curator—the rate is determined by the person who chooses the risk. As soon as you give them that power, now they can underwrite anything.

Before, they could not, because the rate was controlled by a formula, right? And they did not control the formula. It was an immutable protocol, et cetera. Now that you give the power to the curator network to give a price, now they can price anything, right? And this is how you can go way, way, way beyond cross-collateralization in general.

9. Screenshare demo of Morpho fixed rate markets

But yeah, we can talk about this more.

Paul, do you think we could screen share for a few minutes?

Sure, let’s do it.

That’d be great. Paul, talk us through how we would start to navigate Morpho Midnight as either a lender or a borrower.

Sure. I guess the first thing to look at is how Morpho Blue works today. You have markets with a collateral asset and a loan asset, and you can click in and borrow some liquidity immediately. Your rate is going to be floating. The rate doesn’t move that much depending on how liquid the markets are, but it’s variable.

With Morpho Midnight, we have an interface that’s slightly more advanced because it’s more for advanced users. We also have a consumer application that can integrate a fully abstracted flow, but this is just to give everybody the full perspective on what’s happening behind the scenes. Here again, you have another market. The loan asset is USDC, the collateral is Bitcoin, but this time there’s a maturity date.

When you borrow on this market, at the end of the 40 days, you need to repay. In Morpho Blue, you don’t have to repay; it’s open-ended. In Morpho Blue, the rate is variable, but on Midnight, you have a maturity and a fixed rate.

When you open a given market, you’ll notice that there’s an order book. This is what happens behind the scenes in Morpho Midnight: when you’re borrowing and when you’re lending, this is not a pool of liquidity. It’s a book where people can express their intent to lend and borrow. Anyone can come in and decide to add an offer at the given rate they want.

If you’re willing to lend against Bitcoin, you can, and you can also set the rate at which you would be willing to make that trade. For example, I select 1,000 USDC that I would lend against Bitcoin according to specific parameters, and the maturity would be August 7th.

What’s very cool about Midnight is that you can actually offer that same 1,000 USDC to other markets at the same time. That’s one of the key features that we think is going to make Midnight very successful. Even though the markets are isolated, you have the ability in Midnight to lend the same 1,000 USDC to multiple markets at the same time.

You could literally have this 1,000 USDC available to be borrowed from thousands and thousands of markets. When you come as a borrower on the other side, you don’t see liquidity being fragmented. The same 1,000 USDC is available everywhere at the same time.

That’s more of a technical detail, but it shows everybody how you can make those multimarket offers across a wide number of books. That’s how you make offers. Now, if you want to borrow directly or lend, you can simply take by clicking either Borrow or Lend and then Take. You can add an input, and you’ll basically be entering the book at 4%.

10. Understanding how multi-market offers work

So, Paul, if I were to offer to lend, let’s say, 1,000 USDC at 5.46% or whatever it is, are you saying that while it might be sitting idle for a bit until someone ultimately takes up that offer, opens a loan, and borrows, it’s not just sitting there idle? It can be lent out to, let’s say, a Steakhouse or KPK vault somewhere else?

Yeah, I’m glad you asked. At the protocol level, you can decide to make it idle if you want to. If you decide not to invest that money, you can. That’s how the core protocol works.

However, Morpho has a functionality built in called callbacks. Callbacks allow you to have your money set somewhere, whether that’s in a Morpho market or a Morpho vault, so that you can generate yield in your existing Morpho vault strategy, which is at, I don’t know, 5%.

You can say, “Hey, I’m earning 5% on my vault, but I’d be opportunistically willing to lend to someone at 8%.” You can make that offer at the same time, sit on the book, and wait for a match. If you get matched, then you get a better rate.

For the people who have been following Morpho for a long time, that’s actually a very similar concept to what the initial Morpho protocol—the Morpho Optimizer protocol—was like back in the day. You basically lend into a pool, wait for a match, and so on. There’s a whole protocol history in Morpho that fits nicely into the story as well.

Yeah, there’s something here that reminds me of the initial value proposition with V1 of Morpho, where we were optimizing our lending yield across either Aave or Compound at the time. What’s interesting here is that I believe we’ll end up with bigger markets and better opportunities, but there’s a need to bootstrap that interest. The ability to put that idle capital to work until it’s actually being lent out makes so much sense to me.

One thing about that: if I wanted to lend USDC here at something like 10%, at a higher rate, and in the meantime allocate it to some other vault or lending opportunity on Morpho, are there limitations there? I’m thinking again about the more reputable curators and the more liquid markets. The biggest ones out there, like Steakhouse, make sense to me as places where I could lend and then have that callback option.

But I’m thinking about more risky markets. There are obviously some really risky vaults out there where the collateral isn’t as reliable, and things can go wrong. We’ve seen it go wrong with certain vaults. Is there anything you can share there?

You mean the callback ability connected to those vaults?

Yeah. Let’s even pretend that all the USDC is borrowed in a vault where I’ve allocated my idle USDC before it gets borrowed in Midnight.

Yeah, it’s a good question. Basically, what happens behind the scenes is that there’s a routing algorithm, similar to Uniswap, that tries to rebuild the book and display it to the user. This router is going to look at every offer, everybody who has been making offers, and the callback.

If the callback says, “The liquidity is not available,” which would be the case in the scenario you described, the offer would not be displayed in the first place. The routing algorithm of Morpho is constantly discovering new offers that exist, and if they’re invalid, they won’t be displayed and won’t be taken by users.

11. Expectations for maturity dates

Okay, Paul, maybe a couple of quick ones here. One thing I’m thinking about is maturity dates. I saw a few examples there. What are you thinking—what will they look like? What will be the maximum? And any idea what you think users will really gravitate toward as far as a maturity date?

I think we’re starting very small with Midnight in general, in terms of the number of markets and flexibility at the beginning. We’re not looking for an explosive launch. DeFi has suffered a lot of different hacks and security issues over the last few months, so we want to take it extremely, extremely slow.

Initially, we just want to roll out a few markets with 1, 2, or 3 maturity options—short-dated maturities. I think currently at the protocol level, it’s an 8-day maturity and a 40-day maturity.

Over time, as liquidity builds up and market makers, lenders, borrowers, and curators join, more maturities will be enabled at the protocol level. Eventually, it can become pretty customizable. If someone wants a very specific maturity, they will be able to get that very specific maturity if they want to. It’s just that at launch, we wanted to keep things pretty simple.

12. What Midnight unlocks for leverage and loopers

Yeah, I saw your post that there are a bunch of features coming, like rollovers if you want to roll over into another loan. So it’s kind of more automated and things like that. One other thing I really want to get your perspective on is what this does for leverage. Looping and getting leverage has been huge in crypto, and clearly, variable rates can cause a problem. How do you think this is going to work with people who want leverage? To me, it’s kind of like the perfect offering. Is there anything you’re doing in Midnight to automate that for people as well?

Yeah. I think generally, the number one critique of people who have been leveraging assets in DeFi is obviously the variable rate, right? That can get pretty messy. We’ve seen this during the liquidation events of Kelp DAO. Some loopers got really burnt because their rate was through the roof. When you’re on leverage and your rate goes to 10%, you can really lose a lot of money very, very fast.

I think after this, a lot of DeFi funds quit RWA leverage or crypto leverage in general. The feedback that we got is that unless there is some fixed rate, we would not do leverage again. That’s for the crypto-native side of things.

On the institutional side of things, leverage is also common. It’s not just a crypto thing, obviously. For them, it’s a sine qua non condition: they would never do leverage on a variable-rate construct. They would always use only fixed rates; they want control. Those institutions are very serious. They have quant models. They want to control their risk, their downside, and their upside, and Midnight allows them to do that. This is what we’re very excited to have those guys use the protocol for.

Well, if you’re listening to the podcast, Morpho Midnight should be live, so I think this is a great place for us to start to wrap up. I think this is an awesome first look at Morpho Midnight. Paul, thank you so much for your time. I want to give you the final word here. Any final thoughts on where Morpho goes next? You’ve built so much, and this is a big milestone. It does look like a major new primitive that is complementary to everything we love about Morpho. Where do you go next?

I think building around Midnight is going to take us a few years, literally. There’s so much depth thanks to the Midnight primitive, and so many things to build around it. I think where I focus my time now is: How are we going to enable obligations between parties through the Midnight protocol in all kinds of ways, directly on-chain?

For Morpho, what that means is, how can we supercharge existing crypto lending use cases? But most importantly, how do we go beyond crypto? How do we leverage the chain infrastructure to power traditional loans in a way that is more efficient, cheaper, and more liquid than everything we’ve done before? How do we connect this to global distribution? How do we make sure everybody can benefit from this? This is really where I spend most of my time.