Morpho x Moonwell: Strategy for Multichain Expansion
Introduction
At Moonwell, we’ve built what we believe is the best frontend experience for Morpho vault depositors and Morpho market borrowers. We’ve made it incredibly easy for anyone on Base to supply ETH, USDC, EURC, and now cbBTC into a vault, and already support advanced features like Morpho Bundlers and the public allocator for borrowers.
With advanced features like USDC Anywhere, which leverages Circle’s Cross-Chain Transfer Protocol, vault depositors can onramp USDC from 6 Ethereum networks, including Arbitrum, Base, Mainnet, Polygon, Optimism, and Avalanche. In early 2025, this feature will be upgraded to use ERC-7683 via Across protocol with intents to enable 2-5 second USDC and USDT vault deposits from most L2s.
In addition, Moonwell contributors at Cypher recently launched a Moonwell Visa debit card that supports “Borrow and Load” as well as “Auto Load” functionality, powered by Morpho vaults. Card users can keep most of their funds in a USDC vault while automatically reloading the card when the balance falls below a user-defined threshold. We will extend this feature to support USDT vaults in Q1 2025.
Moonwell collaborated with BlockAnalitica and B.protocol on the first 4 vaults on Base: ETH, USDC, EURC, and cbBTC, but as the Morpho community looks to deploy the Morpho factories across many new L1/L2 networks, there is an incredible opportunity for Moonwell to expand across the Superchain. Moonwell has always been aligned with scaling Ethereum, and we believe the best way to do that is through the Optimism Superchain.
While Moonwell maintains a strong alignment with Base — including the expertise of contributors like Luke Youngblood, who launched Ethereum staking at Coinbase — we recognize that scaling Ethereum is best achieved through the broader Superchain ecosystem. The emergence of new Superchain L2 networks, such as Worldchain and Kraken’s Ink, along with upcoming launches like Unichain, will introduce new capabilities, applications, and liquidity that don’t yet exist on Base. We believe that Base will continue to serve as the largest liquidity layer and user hub of the Superchain, and it will always be Moonwell’s “home base,” but that doesn’t mean that Moonwell shouldn’t expand to offer the best front end in lending to the entire Superchain.
Moonwell vaults currently provide ~70% of the borrowable TVL on Morpho on Base. We recognize that the strong alignment between BlockAnalitica and B.protocol through Moonwell ecosystem grants curator performance fee sharing has allowed their vaults to succeed in ways that other vault curators can’t, and would like to explore the opportunity to expand alignment between Moonwell and other vault curators
Proposal
After the Morpho factory contracts are deployed, Moonwell proposes to collaborate with multiple risk curators to activate, manage, and provide the best front end and reward distribution experience for Morpho vaults and isolated markets across select Ethereum networks such as Uniswap’s Unichain and Kraken’s Ink. This expansion enables Morpho and Moonwell to establish a first-mover advantage on emerging high value Superchain-aligned L2s, delivering secure, institutional-grade lending services that align with both communities’ values and priorities.
We aim to offer two levels of alignment with the Moonwell community:
- A basic level of alignment that allows vault curators to be included in the Moonwell frontend for a minimal 5% of the vault’s performance fee.
- Example: with a 10% Morpho Vault curator performance fee, this would be 0.5%
- This fee is necessary to compensate Moonwell contributors for the time and effort to include the curator’s vaults and markets in the frontend.
- While most vaults would be eligible, certain vaults may be ineligible due to excessive risk of collateral markets they supply borrowable liquidity into.
- A higher level of alignment that allows vault curators to apply for grants of WELL incentives and prominent placement if they share additional revenue with the Moonwell DAO. Please contact Moonwell contributors or delegates for further discussion.
What Moonwell Offers to Morpho Users and Vault Curators:
- Cross-Platform Accessibility: Desktop and mobile support for easier adoption.
- Extensive Wallet Compatibility: Integration with 350+ wallets, including passkey wallets like Coinbase Smart Wallet, Zerodev, and Thirdweb.
- Gas Sponsorship: Via ERC-4337 and Paymaster/Bundlers for reduced user costs.
- Multi-Language Support: English, Spanish, Portuguese, Chinese, and Korean.
- Innovative On/Off-Ramping Solutions:
- Moonwell Visa Debit Card: Automatically reloads from Morpho vaults, solving the offramp problem while keeping funds in self-custodial vaults that can earn yield until withdrawn.
- Coming Q1 2025: Free US bank accounts (available internationally), enabling ACH/wire deposits to be automatically converted into stablecoins like USDT or USDC in a Morpho vault.
Motivation
This initiative to expand into emerging Superchain-aligned Layer 2 networks will unlock significant opportunities for both the Morpho and Moonwell communities, as well as the broader Ethereum ecosystem:
- For Morpho: Accelerate adoption on strategic L2s by leveraging Moonwell’s proven and popular user interface, robust security measures, engineering expertise, and advanced features, facilitating the rapid deployment of Morpho infrastructure.
- For Vault Curators: Gain early access to high-growth networks by integrating with Moonwell’s leading lending front end, increasing visibility and accessibility for their vaults and markets.
- For Moonwell: Strengthen alignment with Morpho vault curators while fostering long-term growth through fee-sharing opportunities and a more diverse range of curated vaults.
- For Ethereum L2s: Introduce scalable, high-performance lending infrastructure that enhances network utility, attracts liquidity, and accelerates ecosystem development.
- For Users: Experience seamless and secure access to lending solutions across Ethereum’s rapidly expanding Superchain, with innovative features such as the Moonwell Card for self-custodial offramps and bank accounts that automatically convert deposits into stablecoins.
Proven Track Record
Moonwell has consistently proven its ability to deliver secure and innovative lending solutions, establishing itself as a trusted leader on Base and Optimism. By combining cutting-edge technology, robust risk management, and an intuitive user experience, Moonwell continues to push the boundaries of what is possible in onchain finance. This success is reflected in the protocol’s strong growth metrics and leadership within the Morpho ecosystem.
Protocol Growth
Moonwell has established itself as a top DeFi protocol on Base with exceptional adoption metrics:
- Total market size of over $1B
- 100,000+ WELL token holders securing the protocol via onchain governance
- 224,800 total users with an average of 466 new daily users
- 1.9M total transactions with 3,900 daily average transactions
Vault Performance
Since their day one launch in July 2024, the Moonwell Morpho Vaults have captured unrivaled market share through three key differentiators: industry leading risk management, optimized incentives, and a seamless user experience.
Current Vault TVL:
- Moonwell Flagship ETH Vault: 105,070 WETH ($105.07M)
- Moonwell Flagship USDC Vault: 41.17M USDC ($41.17M)
- Moonwell Flagship EURC Vault: 11.7M EURC ($11.7M)
- Moonwell Frontier cbBTC Vault: 15.84M cbBTC ($15.84M)
Key Achievements:
- Total Vault TVL of $173.78M, representing approx. ~70% of all Morpho Vault liquidity on Base.
- 25,000+ unique vault depositors
- Block Analitica releases updated allocation model ensuring risk adjusted yield maximization.
Proposed Approach
Early 2025 Deployments:
- Activate Moonwell on Unichain and Ink in Q1 2025, prioritizing additional networks identified as high-value with key ecosystem stakeholders.
- Moonwell protocol activations are subject to Moonwell DAO approval via onchain governance.
- Assist vault curators interested in stronger alignment with Moonwell with grant proposals to incentivize their vaults and markets.
- Deploy Morpho vaults and isolated markets with carefully curated assets and risk parameters to ensure safety and attract liquidity.
Infrastructure and Integration:
- Leverage Morpho’s factory contracts for isolated market and vault deployments.
- Implement lightweight indexing support for market and vault aggregation metrics (e.g., aggregate TVL and liquidity).
- Support user-friendly features such as passkey wallet integrations and Moonwell Card compatibility for seamless onboarding and liquidity management.
Liquidity Incentives:
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Establish simple staking contracts for Morpho vaults to receive WELL token rewards and ecosystem incentives.
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Rewards, as with Moonwell’s Core Market incentives, will be claimable at any time, appealing to yield aggregators like Yearn, Harvest, Beefy and yield tokenization protocols such as Pendle.
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This rewards system ensures competitive APYs while bridging the gap until Morpho’s Universal Reward Distributor (URD) infrastructure arrives later in 2025.
Expanding Front-End Integration:
- Introduce a path for third-party risk curators to list their curated vaults on Moonwell’s front end.
- Integration Requirements:
- Vaults must meet Moonwell’s security and risk management standards to ensure user safety and ecosystem integrity.
- While most vaults will be eligible, vaults that supply into markets with high risk collateral assets may not qualify for integration. Price feeds and collateral assets in markets must not be too risky, to protect Moonwell frontend users who have a high degree of trust in the markets and vaults presented in the frontend.
- Benefits:
- Enhances the diversity of Morpho vaults available to Moonwell users, giving them access to differentiated yield strategies.
- Fosters increased collaboration between Moonwell and Morpho vault risk curators.
- Integration Requirements:
Expected Outcomes
- For Morpho:
- Strengthen Morpho’s ecosystem presence by securing early deployments on top Ethereum L2s.
- Cement TVL growth through incentivized liquidity and industry leading risk management.
- Enhance Morpho’s value proposition to ecosystems seeking best-in-class lending infrastructure.
- For Moonwell:
- Achieve first-mover advantage on top networks, building strong TVL foundations for long-term growth.
- Capture a share of performance fee revenue from aligned vaults and allocate proceeds to bolster Moonwell protocol reserves.
- Drive chain specific grant opportunities by demonstrating integration with network specific assets and technologies.
- For Risk Curators:
- Leverage Moonwell’s simple to use, yet state-of-the-art interface and rewards infrastructure to establish a foothold on high-growth Layer 2 networks with minimal independent overhead.
- Gain exposure to a wider audience of liquidity providers and DeFi users by being featured on Moonwell.
Conclusion
The Morpho and Moonwell communities share a common vision of advancing the Ethereum ecosystem through the development and deployment of innovative, secure, and user-friendly onchain financial products. By integrating Morpho’s next-generation lending infrastructure with Moonwell’s intuitive user interface, consumer-focused features, and support for advanced tools like gas sponsorship, passkey wallet support, US bank accounts for easy onramping of stablecoins, and the Moonwell Visa debit card, both projects are well-positioned to drive the growth of emerging Superchain networks.
Moonwell’s openness to third-party vault curators further promotes ecosystem diversity by offering curators opportunities for alignment, streamlined integration, and enhanced visibility. This collaborative approach underscores Moonwell’s commitment to delivering scalable, user-centric solutions that foster adoption and increase utility.
Together, Moonwell, Morpho and the incredible risk curators in the Morpho ecosystem have the potential to set a new benchmark for onchain lending by combining their strengths to create value across the broader Ethereum ecosystem. We encourage the Morpho community to share feedback and collaborate to refine this strategy, ensuring it benefits users, curators, and the broader DeFi ecosystem.
