Morpho x Uniswap

Oh Maybe I need the clicker Thank you So hi everyone Thank you. So, hi, everyone. So, today I'll be speaking about composability of trustless financial primitives. So, the two things I want to cover today is, like, how we think at Morpho about, like, financial infrastructure in general, how we think about it being, like, you permission as decentralized and primitive Similarly to Uniswap and how we see, you know few use cases of you know more for composing with Uniswap and like a few examples essentially So for those who don't know about more for ready we are, you know Decentralized lending and borrowing protocol on on his firm. We're permission less.

We primitive, and we're immutable and governed. And today we have like $2.5 billion of deposits on Ethereum and base. So first I want to chat through the architecture because we're going to need that for the use cases. So Morpho is made of multiple pieces.

The first piece of the Morpho architecture is the Morpho markets. So you can think of Morpho markets really as Uniswap markets. It's extremely simple, primitive, 600 lines of code that does really essentially just one thing. You have like one collateral asset, one loan asset, one liquidation loan to value that says how much you can borrow of one asset with the other as collateral, and an oracle. Of course, an interest rate model.

So that's one pool. And it has the following properties, being permissionless and immutable, anyone can deploy it. You can deploy with any tokens. But obviously, a bit similarly to Uniswap, you have the problem of, okay, I have a lot of different markets. In the case of Uniswap, you have the Uniswap router or UniswapX in order to re-aggregate.

The equivalent on the lending side of re-aggregating for us is what we call MorphoVaults. So essentially risk curators, people doing risk curation, so deciding which market is actually safe to lend against. Well, you have a vault owner that would decide for you, and you just deposit in the vault. So a vault owner could be anyone. It could be a risk company, such as Gauntlet, or Stakehouse, or Block Analytica, or it could be like a DAO.

So for example, we have MakerDAO. They own some of the MorphoVaults. They have 200 millions in there, and they hire a risk-rating firm in order to be able to create the vault, essentially. And so think of it as a re-aeriation of MorphoMarkets, essentially. Okay, and so the Morph more for stack works the following way.

You have the vaults at the top, and then people interact with the different markets. And obviously, different vaults can share markets with one another. So the base primitives, like the immutable markets, they're stateful, and they can be reused across different risk profiles. So one vault could try reused across different risk profiles. So one vault could try to do the compound risk profile, another vault could try to do the Aave risk profile.

Compound and Aave segregate liquidity. In the case of Morpho, they would share liquidity to the extent that they share markets. And again, both of the code bases are completely mutable. Okay, so it looks like this. It's just this sort of aggregated structure with the different vault managers and obviously the app layer.

Okay, so what we're going to look into, and that's more interesting for this talk, is how we think about financial infrastructure and collaborating with Uniswap before as a whole. So as I mentioned, Uniswap is for swapping, like Morpho is for lending and borrowing. We share those following principles in common. Permissionless and immutable, like slash decentralized is obviously known for everyone, even though there are interesting nuances. Like all the DeFi protocols claim to be decentralized.

Very few of them are actually immutable Especially in the landing space. I even believe we're close to be like the only one and And sorry and and the other one that I believe is very interesting is the primitiveness like how instead of having one big monolith You rebuild things in layer and you essentially have like those reaggregation layers So for lenders for bars, I did not talk about, but there is also some concepts. Okay, so the first obvious hook that is interesting for Morphine and Uniswap to be used together about is on Uniswap, V3 and soon V4, there is a lot of liquidity that's not utilized, and that's not when trading. That's out of range. And so, especially for volatile pairs.

And so essentially, a hook could enable essentially this liquidity that's out of range to be deposited into a MorphoVault, for example. So, you know, I think, for example, is the DAI USDC pool is famously, like, yielding very little for, like, I believe 70 million of liquidity deposited. The last time I checked, it's, like, yielding at 0.4%, right? So what you could do is, like, have the maker DAI vault below and the, you know, let's say Gauntlet or like Stakehouse USDC vaults that essentially are able to generate yield with this ERC 466 vault.

I would say, though, that it's not specific to Morpho. You have, obviously, a bunch of 466 strategies. But at Sys here, you have common guarantees and common principles on the way things are assembled together. OK, so obviously, the benefits of this approach is there was this similar concept first introduced by Balancer, like the Balancer Boosted Pulse. That can obviously be done with this Uniswap vFree style approach, where essentially you increase the yield, you increase the capital efficiency, and there is really very little capital that is idle.

The only capital that is idle is the liquidity that is not utilized, that is out of range, that is deposited in the pool, and that is not being borrowed, right? So you can reduce it really to the very minimum. Okay, where it gets interesting, and this is probably where we're spending most of our time Okay. Where it gets interesting, and this is probably where we're spending most of our time researching, like Unisoft before hooks, is about integrating Oracle pools inside Morpho. So for those who are not familiar, I don't know if there was a presentation about this, but Oracle, Unisoft before Oracle pools are essentially like pools specifically designed to act as oracles.

So obviously in Uniswap before, there was a TWAP already integrated into the pool. For gas efficiency reasons and customizability reasons, it was removed from the core protocol in Uniswap before, and now can be integrated in a new pool thanks to a hook, essentially. And so one article that I would definitely recommend, which I don't have here, but I believe was written by Austin Adams on truncated oracles. It's in the Uniswap blog. Well, essentially, you can have very high customizability on the way you design oracles in a trustless way.

So the way it works is that you create a hook for, let's say, a TWAP or a geometry average oracle, like the truncated oracle presented in the article I'm referring to, and then you deposit liquidity. And then essentially what you can do is you can have a model that essentially states what is the economic security of your oracle with regard to the lending protocol. So how much, in case of volatility, how much accurate the oracle is going to be, how reactive it's going to be, depending on the amount of liquidity that's being deposited in the oracle pool. So, okay, you deploy the the Oracle pool, you deposit liquidity, and then you let arbitragers essentially arbitrage the pool. And that's going to give you a price that is up to date.

There is a little bit of a latency component. But overall, it's much better than the Uniswap D3 TWAP. And it's also highly customizable. So we have this interesting setup where you could have Uniswap B4 trading pool that's ultra-optimized because all the liquidity that's out of range is deposited in some kind of yield solution using immutable code, again, which itself uses as oracle in order to price the collateral assets and price the liquidation thresholds, et cetera, uses the different Uniswap markets, et cetera. So the beauty of it is you have this kind of symbiosis between two singleton contracts, by the way.

So you just have two contracts that are involved if you interact only with the markets, that interact with one another in order to make this symbiosis happen. So yeah, that's about it. It was just a cool use case to walk you guys through. And I hope we should be able to get this out soon, first as an experiment, but then hopefully scale it a little bit as well. Thank you very much for listening.

Thank you.