Gauntlet embraces a new standard for DeFi lending embodied by Morpho which externalises risk management, marking a growing shift away from a monolithic to a layered approach.
27th February 2024 - Gauntlet, a DeFi-native quantitative research firm specializing in risk management with $9 Billion in client assets protected, is joining Morpho, a trustless decentralized finance (DeFi) lending protocol, as a risk curator to design transparent and automated lending vaults for users.
Gauntlet’s decision to join Morpho signals a growing trend towards newer lending protocols and away from the monolithic paradigm. Morpho takes a fundamentally different approach to lending with its new lending protocol: Morpho Blue. Morpho Blue’s approach, which externalises risk management from the protocol, removes trade-offs between growth and risk by creating clear alignment between risk experts, users, and the protocol.
“Designed as an infrastructure rather than a product, Morpho Blue allows risk experts to build scalable products and services on top of a common base layer. Gauntlet has a great reputation in the space, and their choice to join forces with Morpho is a big endorsement of this new approach towards lending. Gauntlet curating lending vaults on Morpho is the biggest paradigm shift in DeFi since Compound V2's rise,” says Paul Frambot, Co-Founder & CEO of Morpho Labs.
Gauntlet uses battle-tested techniques from the algorithmic trading industry to help protocols manage risk. Gauntlet will use their expertise to curate various high-quality lending vaults using Metamorpho, an open-source protocol for permissionless risk curation built on top of Morpho Blue. These lending vaults combine the best of isolated markets and multi-asset lending pools to provide users with a simple and optimal way to earn yield on their assets.
“Working with a team of quants used to trading in milliseconds, we’ve always looked for faster paths to proactively manage risk and capture growth opportunities. MetaMorpho is our best opportunity yet to directly stress test our capabilities,” says Nick Cannon, VP Growth at Gauntlet.
This development shines a spotlight on key shortfalls that current lending platforms face. The primary being that it tends to overexpose users to long-tail risk as it forces them into a one-size-fits-all risk profile, and fails to address their diverse needs. Morpho Blue solves this by moving risk management to an open marketplace, allowing the creation of diverse risk profiles. This "externalizing" grants users the freedom to adopt or develop risk strategies that best suit their individual needs.
This development shines a spotlight on key shortfalls that current lending platforms face. The primary being that it tends to overexpose users to long-tail risk as it forces them into a one-size-fits-all risk profile, and fails to address their diverse needs. Morpho Blue solves this by moving risk management to an open marketplace, allowing the creation of diverse risk profiles. This "externalizing" grants users the freedom to adopt or develop risk strategies that best suit their individual needs.
A further issue, high costs, is also a considerable barrier for DeFi lending which the Morpho approach helps solve. Unlike the common closed-door approach in lending today where DAOs select only one or two risk managers, Morpho enables open competition as curating a MetaMorpho vault is permissionless. Lowered barriers of entry encourage risk curators to provide more effective and transparent services at a lower cost.
Morpho's vision is to create a fundamental, trustless, and adaptable layer in finance, similar to how the Internet operates, enabling endless possibilities for innovation and customization in the decentralized finance landscape. Morpho’s approach is catalyzing a paradigm shift within DeFi lending and Gauntlet joining Morpho accelerates the transition even further.
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