MIP - MORPHO Rewards Age 9

Morpho Optimizer Rewards
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Summary

The purpose of this post is to define the framework for the distribution of rewards for Age 9, starting on November 18th.

We propose making the age duration flexible, ending at the official launch of Morpho Blue (date to be determined), and distributing a total of 16k $MORPHO per day during this period.

Details

Age duration

Once Morpho Blue becomes operational, most growth efforts will focus on its expansion. To fully optimize the reward incentive strategy for Blue, it’s logical to have a flexible end date for Age 9. To ensure that ages align with the launch of Blue, Age 10 would start when Morpho Blue’s address is set at blue.morpho.eth.

Distribution rate

As Morpho Optimizers continue to gain maturity in their market adoptions, we propose to continue reducing the rewards incentives, decreasing the emission rate by 10%.

During Age 8, 800k $MORPHO tokens were distributed over a span of 45 days. Reducing this distribution rate by 10% results in a daily distribution of 16k $MORPHO tokens.

Applying the same model as in previous ages (detailed in this forum post) to compute the distribution of rewards (setting markets with P2P disabled to zero), the markets would receive the following shares of rewards:

Optimizer AaveV2 CompoundV2 AaveV3-ETH
Market DAI WETH USDC USDT WBTC USDT WETH
Weight 2.3% 37.1% 9.9% 5.2% 9.0% 4.3% 32.3%

9
91500×500 67.6 KB

The allocation of rewards between the supply and borrow side for a given market will follow the repartition of supply and borrow on the market at the beginning of the Age, except for WETH where it will be only on the supply side on AaveV3-ETH Optimizer and shared equally on both sides on AaveV2 Optimizer.

Next Steps

After discussions with the community, we will push a vote on Morpho’s Snapshot.

A forum post about the reward strategy for Morpho Blue will be published in the coming weeks.

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It seems logical to switch $MORPHO emissions to Morpho Blue to encourage people to provide their liquidity there.
Morpho Blue’s structure will also greatly reduce the spread between the APY of borrowers and lenders, among other advantages.
So it also makes sense to remain flexible for this switchover with daily issues.
A bit like what was done on a smaller scale for the Morpho AAVEV3 optimisation release.
In favour.

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I too find it logical to switch $MORPHO emissions to Morpho Blue to drive liquidity and usage to this new primitive.
In the meantime, providing Optimizer users, early participants to the Morpho ecosystem, with continued $MORPHO rewards makes sense and I support this proposal.

One thing that I think it is important to start discussing, however, is how these Rewards Ages and incentive structures may change as MetaMorpho and Morpho Blue are deployed.

These are some questions I have:
Will MetaMorpho vault managers be receiving $MORPHO to continue to keep these vital members of the ecosystem aligned and engaged with governance/delegate accordingly?

Similar to the $AJNA deployment in which the token was provided to Summerfi to distribute as they saw fit to depositors and borrowers, should a similar practice be implemented with MetaMorpho vault managers?

Instead of a similar rewards structure where simply the depositor’s size in the pool determines their slice of the rewards, I would like to see the implementation of a multiplier where depositors who have been in the pool longer earn $MORPHO rewards at an increased rate (determined by governance) over time. This benefits smaller participants, such as myself, who are early supporters of the project, but lack the size to be rewarded, and therefore given less governance influence, because of this. This also incentivizes early and long-term participants, but I understand it can be more difficult to implement so further discussion may be required.

These are just some questions and concepts to initiate conversation as we approach the release of Morpho Blue and MetaMorpho. I look forward to upcoming discussions on the topics to promote a successful launch.

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Hi farfel.eth, and thanks for your contribution to the reflection!

Will MetaMorpho vault managers be receiving $MORPHO to continue to keep these vital members of the ecosystem aligned and engaged with governance/delegate accordingly?

Similar to the $AJNA deployment in which the token was provided to Summerfi to distribute as they saw fit to depositors and borrowers, should a similar practice be implemented with MetaMorpho vault managers?

At the beginning, rewards will be distributed to MM users directly to ease the work of the vault managers (setting up a distributor can be tricky and may create friction for the launch). After a certain period, rewards will be distributed to the MM vault. The vault will then have the flexibility to distribute these rewards as they deem appropriate, including the option to retain a portion for themselves. This has a beneficial property: the larger the volume of the MM vault, the more rewards it earns, making it even more aligned with Morpho ecosystem as it gains users.

I would like to see the implementation of a multiplier where depositors who have been in the pool longer earn $MORPHO rewards at an increased rate (determined by governance) over time.

It’s an interesting idea that we’ll consider in our reflection. An interesting aspect is that it creates an incentive to stay within the protocol to keep the rewards boost. Note that apart from increasing complexity, offering customized reward rates could potentially create undesirable incentives, such as encouraging user grouping.

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