Hey Paul, sure, let me extend a bit my thinking process.
This question of the utility of the token mainly come after the transferability, when we ask ourselves “what’s next?”, notably regarding future emissions of tokens. In the case of MORPHO, emissions are a key factor of the competitiveness of lending through Morpho Blue.
For any decentralised protocol with reward distribution in governance token, to be truly decentralised, the allocation of rewards need to be decentralised as well, so either immutable, or governed by governance (ideally on-chain governance).
As immutable is good in the short term but lacks flexibility in the long term, I don’t believe it is the best option in an ever-evolving market. I therefore believe that the best way would be to have token holders vote on this allocation (which doesn’t mean a portion cannot be allocated to some elected centralised committee able to do deals, or choose strategic development, like what PancakeSwap is doing). Now, this has some side effects (e.g. people buying just to vote and sellling after, etc.), which can be solved by a locking period, like in veTokenomics. I believe 4 years is a bit long, but probably 1 or 2 years is a good locking period as it is shorter than a typical cycle.
That being said, there are also benefits from this locking architecture that go beyond the decentralisation and voting question.
First, this allows to offset a good chunk of emissions as recipients will battle to have inflation directed towards them, they will compete by sending a portion of the value to veMORPHO holders, which would often recompound into MORPHO, hence reducing the effective inflation and the dilution of holding the token.
It’s a way to incentivise external users benefiting from the DAO’s rewards to coincentivise. Looking at other models, notably for DEXs, you can see that those using incentives struggle to get pool creators to co-incentivise, while for DEXs using a veTKN model, you see pool creators de facto coincentivising (through vote incentives) with sometimes more than 90% of the total incentives directed. This is because of the great UX for incentivisors, and the improved UX for users who end up farming only one token which is harmonised through all pools (in Morpho’s case it would be the MORPHO token, like today)
This locking infra is also a way to turn an inflationary model into a value accretive one for long term holders. For example with dummy figures, if 50% of circulating supply is locked, inflation is 10% p.a., and protocols are happy to pay incentive direction 80% of incentives value (1.25x efficiency), then after 1 year, people who don’t lock will be diluted by 10%, but people who locked would have increased their position by 16%, so their real value would have increased by ~6%.
On top of that, veTKN generally have some other utility (boost on MORPHO rewards could be one, or reduced borrowing interest for example).
In the end, the veTKN model is a great battle tested way to give value to users while avoiding any risk of being considered a security.
To conclude, I think the veMORPHO model would be the best way to guarantee the long term decentralisation of the protocol, while fueling its growth, and is the most suitable model for a protocol that aims to be a top 3-5 defi protocol.
Happy to go more in details (notably on why I think the solidly model is not as good).