MIP XXX - Katana Coincentives

Morpho Blue Rewards
1

Proposal Summary

The Katana Network will deposit bridged assets into the Ethereum instance of the Morpho protocol to generate lending yield. The Morpho DAO and the Katana Foundation will enter a coincentives agreement to support the growth of the Morpho Protocol deployment on the Katana Network (”the Morpho Katana Instance”) and the Katana Network.

Background and Motivation

Katana, an Ethereum L2 built with CDK OP Stack, has selected the Ethereum instance of the Morpho Protocol to deposit bridged assets to earn yield, with users retaining the ability to opt out. The bridge will deposit in Prime vaults featuring only “blue chip” collateral assets. By engaging in a coincentives program, Morpho will receive additional deposits on Ethereum, as well as supporting new use cases on the Katana Network.

Proposal Detail

Katana’s Commitments

  • Deposits of USDC, USDT, wBTC and WETH into the Katana Network Bridge will be deposited into the Ethereum instance of the Morpho Protocol by default, with users retaining the ability to opt out.
  • No less than 22% of the yield generated by these assets will be allocated toward incentives for users of the Morpho Katana Instance.
  • 2.2% of the Katana Network token supply will be allocated as incentives for the Morpho Katana Instance over a two year period with the initial distribution rate set as 1/24 of the allocated supply per month, with the same relative distribution among different assets as is in use on the Morpho Ethereum Instance at the time that incentives begin. The Morpho Association will be authorized to propose adjustments to the distribution rate under the existing Optimistic Rewards Rate Adjustment Framework.

Morpho’s Commitment

  • The Morpho DAO will allocate MORPHO tokens for coincentives on Katana based on the total deposits made via the Katana Network Bridge into the Ethereum instance of the Morpho Protocol.
  • The Morpho DAO will initially reserve 5M MORPHO tokens for coincentives on the Katana Network, with a distribution rate of ~0.0022 MORPHO per year per dollar deposited in the Morpho Ethereum Instance via the Katana Network Bridge. This represents an incentives APR of ~0.25%.
  • Half of the MORPHO coincentives will be distributed to users of the Morpho Katana Instance, the other half will be distributed either to users of the Morpho Katana Instance, or to other ecosystem growth strategies that are not competitive with Morpho (ie, to bootstrap decentralized exchange liquidity for key assets) at the discretion of the Katana Foundation.