MIP - Introducing Morpho Gauges for Age 3


Morpho Labs proposes to set up a gauge system for the distribution of Age 3 rewards. $MORPHO holder would be allowed to vote for a rewards distribution between markets of Morpho-Compound and Morpho-Aave.


$MORPHO is the governance token of the Morpho DAO. In order to bootstrap the protocol and decentralize the governance progressively, some $MORPHO tokens are distributed to Morpho-Compound and Morpho-Aave users. The distribution is organized in “Ages”, three-month iterations, which define adapted rules and mechanisms for the distribution of the tokens. For more details about this organization, head over to the Age & Epochs section of the documentation.

The first two Ages had a straightforward mechanism because their goal was simply to bootstrap interest in the protocol and its concepts. Morpho Labs now feel the need for a more complex, efficient, and decentralized rewards distribution system. That is why we would like to propose the introduction of a gauge mechanism for Age 3, starting on December 29, 2022.

The Morpho gauges mechanism

Used notably by the Curve and Euler protocols, the gauges mechanisms have received significant interest over the past 2 years. The principle is the following: in order to determine the distribution of a given amount of rewards over different markets (or pools), holders repeat a weighted vote over them, and a repartition is deduced from the results of the vote.

We believe that it would meet the current needs of the protocols. It allows to decentralize the rewards distribution, in line with the process of progressive decentralization of the governance of Morpho, explained in more detail in the Progressive Decentralization Documentation. It enables to fit real demand, compared to the models of Ages 1 and 2. It also frees up the discovery of use cases that Morpho’s peer-to-peer rates could create.

Market distribution vote

The gauge mechanism would influence how the given $MORPHO tokens are distributed among markets. Morpho-Compound and Morpho-Aave markets would be put in competition, meaning that voters would have to allocate their voting power between 14 markets (not counting the FEI on Morpho-Compound, in the process of being deprecated). If a new market is listed, it will be added to the next vote. The vote would take place before the beginning of each epoch, setting the distribution for the whole epoch. The gauges’ weights (total $MORPHO that was voted on each gauge) determine the percentage of the rewards that the corresponding market will receive. The number of tokens m_{\theta_0} that will be distributed on a market \theta_0 can be computed using the following formula:

m_{\theta_0}=M\times \frac{v_{\theta_0}}{\sum_\theta v_\theta}

where M is the total number of $MORPHO that will be distributed during this epoch, v_\theta being the number of $MORPHO that were voted for the market \theta. Simply put, the more vote on a market, the more rewards this market will receive during the next epoch.

The reason why we choose this mechanism over a quadratic market voting, with which n^2 votes on a market accounts for n votes, is that it goes against the very idea of giving this power to token holders. We think that if the market have a clear direction, rewards should follow it.

Supply/borrow allocation

Once the $MORPHO has been allocated to the different markets, we need to distribute them between the suppliers and borrowers of these markets. We think that the best way to do it, at least for the moment, is to give the same “rate” to both suppliers and borrowers: as many rewards for the same volume of supply or borrow. We believe that the market rebalancing with rates should be done via the peer-to-peer index cursor, which is the parameter that set the peer-to-peer APY in the rates spread of the underlying pool. There is ongoing research on this.

To do so, the rewards are distributed proportionally to the total supply and borrow. The number of tokens that would be distributed on the supply and borrow side of a market \theta_0 can be computed according to the following formula:

m^S_{\theta_0}=m_{\theta_0}\times \frac {S_{\theta_0}}{S_{\theta_0}+B_{\theta_0}}\\ m^B_{\theta_0}=m_{\theta_0}\times \frac {B_{\theta_0}} {S_{\theta_0}+B_{\theta_0}}\\

where S_{\theta_0} and B_{\theta_0} are the total supply and total borrow on the market \theta_0 at the beginning of the epoch.


Each vote would be embodied by a weighted voting Snapshot proposal. Snapshot is an open-source, decentralized voting system that allows gasless votes.

Morpho Labs would develop a new front-end page in order to display key information about gauges and facilitate users’ votes.

Next steps

  • After a discussion with the community, a snapshot vote would be pushed. The first vote would take place before the first epoch of the Age 3, starting on December 29, 2022.
  • The community will have to decide the quantification of $MORPHO rewards for the three epochs of Age 3.
  • Morpho Labs will vote for a distribution that we believe will benefit the overall growth of the protocol. We will publish it in the forum for informational purposes.

Gm !

I’m really excited to see this system coming to Morpho !

I was wondering if you are also thinking of introducing a “boost” system in the future or if you have any other ideas in mind ?


Hi there!

Thank you for this very educational proposal! Linking the subject of gauges to the progressive decentralization of the protocol seems to be a good starting point for governance.

Can you clarify a point that I am not sure I understood correctly?

The proposal calls for voting on the gauges for each of the three epochs, or for the age as a whole? I would of course be in favor of voting for each of the epochs, which would allow us to be more flexible about the market context.


Hello @Disiaque, thanks for your feedback !

Yes, one gauges vote would happen for every epoch (~1 month) to determine the distribution among markets during this epoch.

What we were referring to here is the quantification (how much $MORPHO are distributed in total, during each epoch), which must still be determined before the beginning of the Age. The Morpho association, together with Morpho Labs will propose a quantification later this month.


Hello @Starny,
Thank you for your comment! At the moment we decided not to propose “boosts”, what do you think it could bring to the system?


An incentive to hold more $MORPHO to qualify for the maximum boost + new market layer can be built on top of Morpho (Boost sales for example)

I think many of us know how the veModele and thats why I was curious to see gauges but not boosts

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Sure it gives the incentive to keep the $MORPHO token but boosts and veToken models have wider implications. We want to make sure that every single token design step that we propose is answering a clearly justified need for the Morpho Ecosystem. At this stage, we did not feel confident proposing such an advanced model without being able to justify it completely.


As the token cannot be transferred yet, there is no rush in incentivizing users to accumulate.
That proposal makes total sense to me as it’s a good step on the path of decentralized governance.
Although it could lead to a more centralized distribution of the token.
Actual holders would probably keep voting for the strategies they use without having external players buy the token and vote for other strategies.
I guess we’ll see how it goes.
That would be less risky if the token was available for buying. On another hand, we would then need a locking system to avoid governance attacks.


Hello Morpho Dream Team,

I love you work.
A basic question:
With tokenomics shift to a ve-token like mode will appear convex-like black holes alongside. Is there any mean to build convex-like features directly into the protocol?

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Hello @Arem !
We are introducing here a framework to vote incentives distribution, not a new token model. A convex system would not bring value (except maybe the bribes system) to Morpho now.

Hello @MathisGD,
Thank you for this answer and sorry for not being clearer.
I understood the proposal aims to set up and fluidify rewards distribution between markets.
This incidentally favors voting power concentration strategies, outside of the protocol.
So my question is: do you intend to facilitate the organization of voting rights holders?
Will it be left to other protocols?
(Like for Curve, where a whole ecosystem has developed around voting rights management to sell rights to the highest bidder)
The centralization of voting power is in my opinion a major issue and I wonder what’s your set up int his field…

i am an user support that

We don’t agree with this. Your governance power increases linearly with your $MORPHO balance with the proposed mechanism. So you don’t have any interest in concentrating and centralizing your voting power.

About a potential market for voting power: we don’t see any big downside if a market is created on an other protocol, that is why we would not implement anything like this, at least for the moment.

Votes are open until Nov 26 (link) !

I like the gauge idea, but I would love to extend it to the supply/borrow allocation.

If I am supplying USDC, I don’t care about giving more $MORPHO rewards to the borrowers.

There should be 27 markets - you cannot borrow $stETH yet.

People should be able to influence how the given $MORPHO tokens are distributed among suppliers and borrowers.

I would consider removing this whole part:

Supply/borrow allocation

And I would update the formula below to discern supplying and borrowing markets:

The number of tokens mθ0m_{\theta_0}mθ0​​ that will be distributed on a market θ0\theta_0θ0​ can be computed using the following formula:

Did not see the vote had already started.

Anyway, still think it would be a great improvement.

Hello @rudykadoch !

Nash equilibria in a system are dependent on the set of possible actions. Even if players follow a rational strategy, sometimes giving them more options leads to an equilibrium where everyone is worse off.

As a USDC supplier on Morpho-Aave, if you want the highest yield as possible, you want to maximize the total value of your native interests, plus the Morpho rewards. For the second part, you would want to put all rewards on the supply side. But, the first part may also be increased by attracting some USDC borrowers with rewards, such that you can get matched peer-to-peer with them. Considering this, we think that the market would miss great equilibriums with this degree of freedom in addition.

Moreover, rewards must be a means to grow the protocol, not a pure farming tool. They must therefore allow to increase the volume matched in peer-to-peer as much as possible, which requires a demand in both supply and borrow, hence our choice to incentivize these two sides equally.

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The vote passed ! The first gauges, for Age 3 epoch 1, will start at the end of December.

Morpho Labs added a new page about gauges in the Morpho documentation.

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