[Temp Check] Moonwell MetaMorpho Vaults: Next-Gen DeFi Lending

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 MetaMorpho 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

Morpho Blue is a next-generation lending protocol that is trustless, immutable, and non-upgradable. The entire protocol comprises under 650 lines of Solidity code, which cannot be changed or upgraded, lowering potential surface area for exploits and vulnerabilities. It prioritizes capital efficiency and flexibility, enabling the creation of unlimited risk profiles by externalizing risk management from the core protocol.

Key benefits of Morpho Blue:

• Trustless: Immutable and governance-minimized ensuring safety and predictability
• 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, 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:

• Fully transparent, non-custodial vaults with immutable logic and onchain allocations
• Flexibility to lend across Morpho Blue markets, each with unique parameters
• Permissionless vault creation, democratizing access for risk managers
• 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
• ✅ 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 existing Compound v2 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 will be accessible through the Moonwell application and as easy to access and 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

Next Steps

Pending the passage of this temperature check Snapshot proposal, here's a high-level overview of our potential launch plans:

• Onchain Moonwell Improvement Proposal vote to:
  • Deploy USDC and WETH MetaMorpho vaults
  • Establish vault roles and risk parameters
  • Distribute initial WELL liquidity incentives
  • Vault integration into the Moonwell app for seamless user experience
  • Go-to-market push 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.

Voting Options

• Yay: I support the proposed collaboration with Block Analitica and B.Protocol, deployment of Moonwell MetaMorpho vaults, allocation of WELL incentives, and assignment of above roles.
• Nay: I oppose the proposed collaboration, deployment of Moonwell MetaMorpho vaults, allocation of WELL incentives, and assignment of above roles.