TBW - Fixed-rate loans, P2P matching... Everything you need to know about Morpho's new version

Since the launch of Aave in 2017 and Compound in 2018, decentralised credit has boomed. Yet, despite billions of dollars locked up, the majority of flows are concentrated in standard products that are ill-suited to institutional requirements.

With the rise of tokenised Real-World Assets (RWAs), the limitations of the initial model are becoming apparent: no fixed maturity, variable rates with little transparency, and simplistic credit risk management.

Launched in 2022 by Paul Frambot, Morpho is responding to these challenges by offering a programmable, institutional credit infrastructure designed to accommodate the next wave of capital heading into tokenised markets.

>> Paul Frambot (Morpho Labs): "Aave is a bank whereas Morpho is an infrastructure for banks"

The new features of Morpho V2

Morpho V2, launched on 12 June 2025, aims to go beyond the limitations of the first version thanks to a hybrid and modular architecture. This new version aims to provide more stable, optimised on-chain credit that is aligned with the standards expected by institutions, while maintaining the protocol's principles of decentralisation and non-custody. It is based on two technical building blocks: Morpho Markets V2 and Morpho Vaults V2.

Here are the 6 major innovations of Morpho V2:

1 - Fixed-rate loans with a fixed term: stability and predictability

Morpho V2 introduces fixed-rate loans with a term defined in advance, a novelty in the DeFi ecosystem. Thanks to Vaults V2, lenders and borrowers benefit from complete visibility over financing terms, with an elimination of the volatility often associated with variable rates.

Examples:

• A company lends 500,000 USDC at 5.5% over 180 days, with a yield known in advance.
• An institutional borrower commits to a loan of 200,000 USDC over 60 days, with 10,000 USDC in predetermined interest.

2 - Peer-to-peer matching: optimal capital allocation

The protocol abandons traditional pools in favour of a system for directly matching lending and borrowing intentions. Each user defines their parameters (rate, term, collateral), and the protocol automatically makes compatible matches, optimising the use of available liquidity.

Examples:

• A lender offers 5 BTC at 4% over 30 days and is immediately matched with a corresponding borrower.
• A DAI reserve is split between a KYC borrower and a non-KYC user according to their respective preferences.

3 - Diversified collateral: from cryptos to tokenised real assets

Morpho V2 broadens the range of collateral accepted: standard crypto-assets, multi-asset baskets, but also tokenised real assets (bonds, equities, real estate). The protocol relies on several oracles and whitelists to govern the quality and compliance of collateral.

Examples:

• An institution uses a basket of tokenised equities as collateral to borrow 1 million USDC.
• A user combines WBTC, cbBTC and USDT into a single position, valued via Chainlink and other oracles.

4 - Hybrid compliance: DeFi tailored to institutions

Morpho V2 integrates compliance tools (KYC, whitelist, asset filtering), while retaining its non-custodial and decentralised nature. The protocol can segment liquidity according to regulatory profiles, without creating technical fragmentation.

Examples:

• A bank accesses a regulated market with KYC to lend 2 million USDC, while benefiting from the depth of DeFi liquidity.
• Non-regulated users can continue to operate on open markets, without any identification constraints.

5 - Configurable markets: tailor-made granularity

Each market can be precisely configured via Morpho Markets V2. Parameters include collateral type, hedging ratios, default conditions, margins or penalties. This flexibility allows markets to be tailored to the specific needs of each player.

Examples:

• A DAO creates a market dedicated to its native token with a 70% loan-to-value (LTV) ratio and custom penalties.
• A hedge fund establishes a secure market with ETH collateral and a strengthened coverage ratio.

6 - Cross-chain lending: multi-chain and flexibility

Morpho V2 enables cross-chain credit transactions to be activated. The blockchain used for settlement becomes a parameter, allowing users to take advantage of differences in cost, speed or liquidity between networks (Ethereum, Base, OP Mainnet).

Examples:

• A lender splits 100,000 USDC between Ethereum and Base to optimise his return.
• A borrower commits wstETH collateral on OP Mainnet to obtain a USDC loan settled on Base.

>> Aave vs Morpho: the great lending match

A protocol in full acceleration

Liquidity and revenues on the rise

The Morpho protocol is recording steady progress in its key indicators. Its Total Value Locked (TVL) has reached $4 billion, up 22% since the introduction of its token in early 2025. This development is underpinned by improved liquidity pools and a revamped interface, which are helping to boost the platform's appeal.

While Ethereum Mainnet remains Morpho's main infrastructure, development on Layer 2 solutions is playing a structuring role. The Base blockchain now concentrates $1 billion in deposits, or around 30% of global TVL. This multi-chain strategy is being extended to other EVM networks, reinforcing the protocol's operational robustness and footprint in the on-chain ecosystem.

The trajectory is also being confirmed in economic terms. Since the start of the year, vault managers have generated $62 million in revenue, largely thanks to its growth on L2s. By contrast, the Morpho protocol has not posted any revenue as it does not currently charge any fees for itself.

Institutional adoption growing strongly

Morpho is enjoying notable momentum in the institutional segment, with more than $300 million in new loans recorded recently. The integration of Bitcoin assets tokenised via Coinbase has acted as an accelerator: between February and March 2025, the volume of collateral tripled, now exceeding $500 million. These figures reflect the growing interest of professional investors in the protocol.

A liquid and widely distributed token

The MORPHO native token is trading at around $1.52 on the markets, with a capitalisation of $457 million and a fully diluted valuation in excess of $1.4 billion. The offering in circulation stands at around 308 million tokens, reflecting distribution that is already well advanced and significant liquidity on the main exchange platforms.

>> Morpho vs Euler: the modular lending match

What is the weight of Morpho V2 among lending protocols?

Positioning in the DeFi lending market

Morpho is currently positioned as the second largest DeFi lending protocol with $2.2 billion in outstanding loans ($4 billion in TVL). It is still well ahead of Aave with $16.6 billion ($25 billion in TVL). This gap underlines Aave's lead, but Morpho's upward trajectory is evidence of growing interest in its model. The global market for decentralised lending, meanwhile, is now worth nearly $54 billion in locked-in value.

>> With Horizon, Aave plays its institutional card again

Main competitors: Aave, Compound and Spark

Aave retains its dominant position, with TVL approaching $25 billion and more than half of all active loans outstanding across DeFi. The protocol relies primarily on variable-rate loans and benefits from a long-standing user base, spread across several blockchains.

Compound, a pioneer in the sector, maintains a TVL of around 2.5 billion. Its variable-rate peer-to-pool model, although tried and tested, now seems to be reaching its limits in an environment where flexibility and customisation are becoming increasingly important. Morpho is taking advantage of this stagnation to capture a new generation of users.

Spark, more discreet but solid, has $3.4 billion in active loans. Despite sustained growth, the protocol still lags behind Morpho on several fronts, particularly in terms of market customisation and technological adaptability.

Morpho's strengths versus the leaders

Morpho's rise to prominence is based on its differentiated positioning. The protocol offers a fixed-rate product, which appeals to a segment of the market looking for visibility on returns. This contrasts with the variable-rate standards dominating Aave and Compound.

The peer-to-peer matching mechanism also enables a more precise allocation of capital. Some markets are achieving returns of 35% annualised, well above the ranges seen on Aave (typically between 3% and 5%).

The extension to Real-World Assets (RWA) diversifies the forms of collateral available, beyond traditional cryptoassets. Combined with a multi-chain strategy focused on Layer 2 as Base - which already concentrates nearly $1 billion in liquidity - this enhances the attractiveness of the protocol, reducing costs and improving scalability.

>> Compound, Aave, Morpho: how lending is reinventing itself in DeFi

Partnerships

Integration with Coinbase

Morpho has structured its growth around targeted partnerships. One of the most significant levers has been integration with Coinbase. This has enabled Bitcoin-backed loans to be issued via the main platform and the Layer 2 Base network. Thanks to this connection, users can access loans in USDC backed by tokenised Bitcoin (cbBTC), opening up access to a new category of investors, particularly institutional ones.

Since the launch of this product in January 2025, more than $359 million has been borrowed.

Partnership with Centrifuge

The launch of Morpho V2 in June 2025 has been accompanied by a collaboration with Centrifuge, focusing on Real-World Assets (RWAs). This integration makes it possible to introduce tokenised traditional assets as collateral in vaults deployed on Base.

The loan volume associated with these new collaterals reaches $500 million, attracting profiles looking for exposure to assets that are more stable than cryptocurrencies. This partnership strengthens Morpho's positioning at the interface between decentralised and traditional finance.

Collaboration with Credora

Morpho has also worked with Credora to integrate on-chain credit risk assessment. This collaboration introduces risk scores into the protocol's institutional markets, reducing liquidation risks and tailoring lending conditions to borrower profiles. It has led to the structuring of $300 million in personalised loans, helping to reassure major players such as Coinbase Prime about the reliability of the protocol.

Partnership with Moonwell

On the liquidity side, Morpho has partnered with Moonwell to launch complementary lending markets on Base. This partnership has increased the resources available on the protocol by $200 million, with almost 200 markets activated. The integration enhances the efficiency of peer-to-peer matching, lowering execution costs and broadening the diversity of available markets.

Investor support

Morpho has the backing of leading institutional investors. Between 2022 and 2024, the protocol raised $70 million from funds such as a16z, Coinbase Ventures and Ribbit Capital. This funding supported the development of Morpho V2 and the expansion onto several blockchains. They have also facilitated access to new distribution channels for its token, via commercial partnerships with players such as Robinhood and Revolut, while helping to take TVL to $4 billion by mid-2025.

>> The Big Whale Report - DeFi & TradFi: the great convergence

‍