The Base instance of the Morpho Protocol is seeing strong growth, with total supply at time of writing of $172M vs $1.1B for mainnet. The max MORPHO reward rate on Base remains substantially lower than on mainnet, with an S_lim value of $60M compared to $500M on mainnet. Right now, the MORPHO reward rate per dollar supplied on Base is only about half of mainnet, which weakens the growth potential of the Base instance.
This is a proposal to make increase the S_lim value by 100% to $120M. At current deposit sizes, this will bring the per-dollar reward rate on Base roughly in line with mainnet.
This is the second in a series of proposals to increment the Base rewards rate, and will be followed by further proposals as more data becomes available about the impact of rewards on network growth now that the MORPHO token is transferable. It is likely that the next proposal should combine an S_lim increase with an r^0 decrease, such that the max per-dollar reward converges towards being the same as mainnet along with the rewards cap being raised. It’s also possible that the ratio between supply and borrower rewards should be adjusted; this can be discussed further in a subsequent proposal.
Overall, we fully support this proposal and more activity being pushed to Base.
One suggestion for the next steps: it might be helpful to include a performance analysis framework in the follow-up proposals, providing clear metrics to evaluate the impact of this change on growth and engagement. This will help the community make more informed decisions regarding future adjustments.
I do not support this proposal or any increase in rewards on Base. I am happy to change my mind with some quantitative data to justify an increase in Base rewards if they can be provided.
My reasons below:
Base, in general, is not a very defi focused chain, so I don’t see an increase in incentives driving an increase in TVL. I don’t believe there is a large enough existing market on Base that would be captured that haven’t already migrated from an existing Base dapp.
I don’t believe Morpho needs to incentivize users moving from other L2’s to Base, but leave that incentivization to the Superchain and/or Base themselves. Coinbase who owns Base is far better positioned to expend capital for chain adoption. Morpho should be more cautious with its capital.
The collateral market is immature and mainnet TVL is stickier and thus I believe the per-dollar reward rate is more valuable on mainnet.
MORPHO rewards are lower than Moonwell’s and in general the rewards can have a negative impact on the most important pools which have low borrow rates.
For many of the reasons above I believe that the ROI on increasing the Base rewards is not worth it. Again, happy to see data proving otherwise, otherwise I will be voting no.
Base has grown from 1.5B in TVL to 3.5B in TVL in barely the past month…
I’d say Base is having strong growth right now. As to judging if it’s a DeFi focused protocol or not it doesn’t seem to be doing bad on that vertical…
Also Base itself could also maybe reward/help push DeFi more but that doesn’t mean it might still be on best interest to attract more users to know about morpho as base growths.
One of the great advantages of l2’s vs mainnet is tx cost are literally cents, few upside on FAFO’ing DeFI if you’re new but eager to try.
It seems a month ago it was already incremented and most people’s views was it was a good idea,
I wonder if that much on sentiment has changed then, what’s the main reasoning for not having -on pair- rewards for all chains mostly, not that i think that any chain should have -better- rewards, after all those should be about marketing morpho and its’ tvl, not the chains it operates in.
Thank you for the proposal. We support this because,
Ethereum’s roadmap emphasizes rollup-centric growth, and maintaining a significant position in a leading rollup ecosystem is crucial for Morpho.
Base stands out as the rollup with the largest TVL and the fast growth rate (DefiLlama). This dynamic ecosystem should not be overlooked when planning incentives.
Competition among lending protocols on Base is intense (DefiLlama) and concerns about diminishing incentive efficiency should not hinder strategies aimed at promoting TVL growth.
The comment from @Leuts, stating that there is no need to bring users from other L2s to Base, does not seem to hold.
If Morpho were deployed on many other L2s, @Leuts’ criticism would be reasonable. However, considering that Morpho is currently only available on mainnet and Base, whether or not users are being drawn from other L2s should not be an issue.
This should be simply about taking the necessary steps to make Morpho a more attractive option within the Base ecosystem.
I support this change, as I don’t see a reason to have different incentive structure between Mainnet and Base. Something I would be curious is how the incentives should change if the TVL start shrinking? Can we have a policy where the incentives are scaled depending on the TVL?
Another point I would like to bring is that we should probably outline a longer term plan where the incentives per dollar of TVL decreases over time. This will be needed in my opinion as it won’t be sustainable to scale the rewards with the TVL forever.
Just wanted to say I greatly appreciate dissenting voices on the forum. A few notes:
Working on getting some better data on rewards, it’s a new data regime now that the token has become transferable and therefore can be explicitly priced + combined with the base interest rate in the data, will have more to share on this soon.
To be clear, MORPHO rewards not incentivizing users to move to Base from other L2s in any targeted way – right now Base is the only L2 deployment of Morpho, and I am overall supportive of per dollar rewards trending toward being uniform across all Morpho deployments (anticipating that there will likely be further L2 deployments next year), with exceptions in the case of new deployments which would have lower total allocations that scale up as they grow.
While Moonwell has a higher reward rate than Morpho, they are also directly incentivizing Morpho usage via their vaults
The part of this I most agree with is that mainnet TVL may be sticker – hoping to provide a more scientific framework for how to choose how much incentive spend should be on mainnet vs L2 in the near future. On the other hand, there is strategic value in pushing hard to be the dominant lending liquidity venue on Base, which is now the top L2 by TVL with strong growth prospects.