TBW - Risk Curators: Who's Running DeFi Lending Markets?

Built on the idea of a system without intermediaries, decentralised finance (DeFi) has rapidly developed infrastructures that operate autonomously via smart contracts. Decentralised exchanges (DEX), aggregators and inter-chain bridges are based on automated mechanisms that guarantee a certain level of transparency and efficiency. But this autonomy reaches its limits in certain key sectors, notably lending and borrowing protocols, where active management remains essential.

To ensure the smooth running of their markets, some projects have made opposite choices. Aave has integrated service providers financed directly by its DAO. Others, such as Morpho and Euler, have preferred to rely on external entities called "curators", responsible for selecting, managing and sometimes optimising the available markets. Still not very visible in the ecosystem, these players nevertheless play a central role in structuring decentralised lending.

With a total locked-in value (TVL) of $3.24 billion for Morpho and $904 million for Euler (as at 13 May 2025), these two protocols are confirming their progress against the sector's incumbent players.

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Understanding the role of curators

In decentralised lending protocols, the curator - or risk curator - plays a steering role that is still little known but provides structure. This entity, sometimes a team, sometimes an individual player, is responsible for adjusting the parameters of the lending and borrowing markets to guarantee their stability and attractiveness.

Its mission covers several aspects: selecting the assets accepted as collateral, setting lending ratios (Loan-to-Value), capping the amounts deposited or borrowed, and adjusting these parameters according to market developments. This is fine-tuning work, designed to control risk without curbing liquidity or returns.

Unlike an isolated investor, the curator has an overall view of the protocol markets, supported by analysis tools and real-time indicators. They operate within a strict framework: every decision is governed by smart contracts, validated according to the rules of the protocol, and recorded on the blockchain. An approach that combines operational responsiveness and structural transparency.

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The Morpho model: active management of Vaults

On Morpho, curators operate through a key tool: Vaults. These structures, designed as simplified entry points, allow users to access lending and borrowing opportunities without having to configure each market parameter themselves. The management of these Vaults relies entirely on the work of the curators.

They are responsible for selecting assets, defining risk parameters and allocating capital. Their objective: to propose strategies tailored to the user's profile, ensuring a balance between return and level of risk.

The role of curator at Morpho comes with well-defined technical responsibilities. A single address can be curator of a given Vault, centralising responsibility. In particular, it can instantly reduce the supply ceilings of a market, whereas an increase in the ceiling - or the opening of a new market - requires a lead time. The curator can also request the deletion of a market or cancel pending modifications.

These levers enable reactive management, but their use is restricted. In particular, curators cannot block user withdrawals. This is a fundamental rule for preserving the sovereignty of depositors, the cornerstone of the decentralised approach championed by Morpho.

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Structured, decentralised governance

While the curator plays a central role in managing markets on Morpho, he or she is not alone on board. Each Vault is part of a distributed governance architecture, structured around several complementary functions.

The owner is at the origin of the Vault. He defines its initial parameters, appoints the key players - curator, allocator and custodian - and sets any performance fees. The curator selects the accessible markets and defines the risk rules. The allocator then intervenes to adjust positions within the framework defined by the curator, optimising the allocation of capital.

The final link, the custodian has a right of veto. He can block certain decisions if he deems them to be contrary to the interests of the protocol or users. This role can be entrusted to a community entity, such as a DAO, in order to strengthen collective control over governance mechanisms.

This multi-tiered system ensures a balance between operational expertise and decentralised control, while making Vaults adaptable to different governance models.

The curators' business model

The curators' business model is based on performance fees deducted from the returns generated by Vaults. These fees, which are clearly displayed, slightly reduce the APR received by users, in return for the management provided by the curator.

The level of fees varies according to the complexity of the market concerned. For Vaults exposed to exotic or illiquid assets, the fee is generally higher. These markets require increased monitoring and frequent adjustments, which justifies higher compensation. These are also the markets where rates are often higher, but also more volatile.

In contrast, Vaults focused on more established assets such as BTC or ETH present less operational complexity. Fees are therefore often reduced there to remain competitive, in an environment where users easily compare net returns.

Morpho complements this model with one-off incentives. In 2024, during the Morpho Olympics, rewards in MORPHO tokens were distributed to curators based on the total locked value (TVL) in their Vaults. This is a way of supporting the protocol's ramp-up while at the same time backing initiatives that are deemed to be relevant.

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Who are Morpho's key curators?

The curation market at Morpho is still concentrated. Fewer than ten players, out of the 21 listed on the protocol interface, share the majority of locked-in value. Five of them - Steakhouse, Gauntlet, MEV Capital, Block Analytica and RE7 Labs - alone account for half of TVL.

Steakhouse Financial

• Seniority: 3 years
• AUM on Morpho: $520 million
• Market share: 21%

Steakhouse offers two types of Vaults: one, aimed at institutional investors (called "Steakhouse"), with sole exposure to so-called "blue chip" assets; the other, called "Smokehouse", is aimed at a more speculative clientele, with less liquid and more volatile assets. The trustee relies on the DAO Aragon to manage the veto right via a Guardian system. This mechanism gives depositors the opportunity to block certain market decisions. In practice, it is mainly used by institutional partners.

"Even if our ownership multisig were corrupted, the malicious person could do nothing because anyone could refuse the changes," says its CEO Sébastien Derivaux.

Notable history: No incidents reported.

Gauntlet

• Seniority: 7 years
• AUM on Morpho: 390 million
• Market share: 16%

Gauntlet is one of the first players to have positioned itself in risk analysis in DeFi. In addition to its activities with Morpho, it has worked with Aave, Compound and Uniswap. His approach is based on quantitative simulations to adjust risk parameters.

Noteworthy history: No incidents reported.

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MEV Capital

• Seniority: 5 years
• AUM on Morpho: $250 million
• Market share: 10%

Historically active in DeFi as an investment fund, MEV Capital has extended its skills to curation. The team highlights its risk management, return optimisation and rebalancing tools.

"Managing risk, doing due diligence and managing a lot of money, that's what we were already doing. These are the qualities we find in our curatorial approach," says Nassim Alexandre, Digital Asset Manager at MEV Capital.

Notable incident: In January 2025, the Usual protocol changed the 1:1 convertibility of its USD0++ stablecoin, used as collateral in a Vault managed by MEV Capital, without prior notice. The result: a sharp fall in the value of the collateral (down to $0.87), the risk of massive liquidations and a liquidity freeze for lenders. MEV Capital suspended its performance fees and opened an alternative market allowing borrowers to transfer their positions, while reducing rates. The intervention limited losses and prevented the generation of bad debt.

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RE7 Labs

• Seniority: 2 years
• AUM on Morpho: 58 million
• Market share: 2%

A subsidiary of RE7 Capital, RE7 Labs pilots Vaults on Morpho and Euler. The team capitalises on the group's asset management experience to structure its curation approach.

"We apply the same risk management standards as in our funds. Expertise is shared between our investment teams and those in charge of curation," says Chadi El Adnani, a member of RE7 Capital's DeFi team.

Notable incident: In March 2024, a lag in the Pyth oracle on the price of cbETH led to the liquidation of a user (estimated loss of ETH 14). The price difference, due to a lack of synchronisation between oracles, was not detected in time. The event remains limited in relation to the TVL managed.

How to assess the quality of a curator?

Identifying the strongest curators on Morpho is not a simple task. The ecosystem is still young, the players communicate little, often for regulatory reasons, and the analysis tools are still being developed. However, a few indicators will give us a clearer picture.

Reputation remains a central element. In a sector where information circulates rapidly, past mistakes leave lasting traces. A curator's seniority, its history in asset management and its ability to launch its own markets (rather than contenting itself with those already in place) are all signals to be taken into account.

"We can look at whether curators have already deployed markets themselves or whether they have just plugged existing markets into their Vaults," says Nassim Alexandre, Digital Asset Manager at MEV Capital.

"Sometimes we use Vaults from other curators such as Gauntlet or MEV, because fragmenting liquidity is not always a good strategy," adds Chadi El Adnani, a member of RE7 Capital's DeFi team.

Another source of information is Vaults performance analysis. On the Morpho interface, interest rates (APR), their stability over time, as well as changes in deposits can be consulted. Here you can see the yield:

A steady growth curve with few sudden withdrawals may indicate controlled management. Conversely, sudden variations may signal problems or altered confidence.

In the example below, we can see that deposits increased gradually from March 2024 to May 2025. There have been some minor withdrawals, notably in December 2024 and April 2025 after a spike, but this growth looks healthy:

The way a curator handles crisis situations is also an important indicator. When a stablecoin fails, a market becomes illiquid or an oracle update causes a problem, the responsiveness and measures implemented - suspension of fees, creation of alternative markets, automated rebalancing tools - provide an assessment of the team's level of preparation and responsibility.

Some Vaults also incorporate an independent rating, such as that offered by Credora Network. These scores aim to provide an external assessment of the level of risk. However, their adoption remains limited: the cost of these ratings can weigh on returns and not all curators use them.

At the end of the day, the evaluation of a curator is based on a range of indicators: reputation, history, technical structure, risk management and relationship with the community. It's still an artisanal approach, but one that is becoming increasingly regulated.

Morpho, Euler, Aave: three visions of curation and risk

Not all lending protocols approach risk management in the same way. Morpho, Euler and Aave each adopt a distinct approach, both in the structuring of their markets, in the place given to curators and in the sharing of costs.

Morpho and Euler have opted for a market compartmentalisation logic via separate Vaults. Each asset is isolated, which limits the risk of contagion in the event of a market default. However, this technical compartmentalisation has a cost: it fragments liquidity. At Euler, this architecture is reinforced by a hybrid model. The protocol combines external curators with an internal Vaults system called "Euler Prime", governed directly by the DAO.

The breakdown of costs also illustrates differences. At Morpho, the curators retain all the performance fees they apply. Euler, on the other hand, takes 50% of these fees, which can ultimately affect net returns for users.

"Morpho does not take a single dollar from the performance fees collected by the curators, while Euler takes 50%, which unfortunately ricochets back to the lenders / borrowers," agrees Nassim Alexandre of MEV Capital

Aave adopts a different logic. The protocol is based on a single pool of all assets, which facilitates liquidity but also pools risk. If an asset becomes unstable, all depositors may be exposed. Here, risk parameters are managed by the DAO, which can limit responsiveness in the event of a crisis. Unlike Morpho, the DAO also retains a greater ability to intervene in funds.

"On Aave, there is the DAO's multisig, which can freeze all markets, whereas on Morpho everything is immutable," explains Sébastien Derivaux of Steakhouse.

These differences reflect choices of governance and technical architecture that influence both the resilience of the protocols and their ability to adapt quickly to market changes.

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The limits of the curation model

The use of curators enables more dynamic and specialised management of lending markets. But this model also has its weaknesses, which need to be closely monitored.

The first limitation is the concentration of power. Today, a handful of curators control the bulk of TVL on Morpho. Most operate with small teams, sometimes made up of just a few people. In the event of a crisis or operational fault, this dependence can pose a problem.

The economic behaviour of curators can also raise questions. Incentivised to improve returns to attract more deposits, some may be tempted to take excessive risks. These trade-offs are sometimes difficult to detect without a detailed analysis of the market configuration. Furthermore, curators do not enter into direct contact with users. They do not actively market their products, which allows them to avoid any regulatory classification as a financial services provider. In the event of malfunction or loss due to incorrect configuration, their liability therefore remains limited.

Another key point: the technological dimension. The robustness of a Vault often depends on the quality of the tools put in place by the curator. Yet these tools - dedicated to monitoring listed assets, detecting market anomalies or automated liquidation - are generally developed in-house. Their effectiveness reflects the degree of sophistication of each team. Quality management therefore relies as much on human expertise as on the ability to integrate advanced technical systems.

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The Big Whale's opinion

Curators occupy an increasingly central place in the architecture of decentralised loan markets. Their role goes beyond simply seeking returns: they provide differentiated risk management, while operating within a transparent framework governed by protocols.

"I find it much more relevant to have an outsourced risk expert, who is not remunerated by the DAO. Otherwise, there's an obvious bias. If Morpho paid me to manage the risk and I refused to list an asset that they proposed, they might not renew my contract the following year on the grounds that I was too restrictive", points out Nassim Alexandre of MEV Capital

Unlike pure DAO governance systems, where decision-making can be lengthy and not widely distributed in practice, the curator model is based on strict rules defined in advance. At Morpho, these rules are codified in smart contracts and visible on-chain. Users retain control of their funds at all times, with the option of withdrawing if they do not agree with the choices made.

This hybrid model, which combines delegated expertise, community control and operational transparency, is emerging as one of the most credible formats for organising risk management in an ecosystem that is still under construction.

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