Supporting MORPHO token liquidity on DEXs

[robotchant]

Wait wait wait…

First of all, not having ETH to pair with Morpho is because you started emission without doing a public or private sale before, and this was maybe a mistake. I guess the early investors budget was spent to deploy the platform.
Now:

1. the last thing I’d like to see is liquidity provided through leverage/borrow against a defi token like Morpho because liquidation and crash in such a case is assured 100%.

2. people are complaining everyday about not being able to claim their rewards in an time that is acceptable for this space, so when I read of “periodic claim” I feel bad.

3. Uniswap v3 is a scam for liquidity providers, as Defi user I only deposit in v2 pools

I don’t have solution for all this, BUT to collect ETH you could just retain a small fee on your servicies, paid by curators and/or borrowers ad start accumulating. In the future this fee can be redirected to morpho holders giving utility to the token.

[OneTrueKirk]

Echoing @hrojantorse 's comment about demand sampling, it seems clear that any public DEX incentives program’s scope should depend on the efficiency of these incentives, which will only be fully known once such a program is attempted.

As such, I’d like to request the community discuss an appropriate budget for a pilot program, with a limited initial duration (say, one month) to gather data. This is separate from the choice of one or multiple DEXs, and I believe it would be appropriate to handle these decisions in two separate proposals (one vote for which DEXs to use on each network, and one to allocate the budget).

[Martin_Merkl]

Hey everyone!

On the goals, I don’t understand why the primary goal should be to build a pool that can support an oracle. Assuming some listings on centralized exchanges for the Morpho token, oracle providers will have ample data to build manipulation resistant oracles. So personally, I wouldn’t necessarily put this as a primary objective, and I wouldn’t try to solve for onchain liquidity while also solving for an oracle.

I do think that it’d be a good idea to seed some liquidity in the pool. Regardless of the incentivization method, it’s always cheaper to have your own liquidity in a pool. This can be done before/after incentivization starts, but the cost of capital for the Morpho DAO to put liquidity with respect to the cost of capital for attracting LPs is always going to be smaller.

There are by the way some good setups to look into with automated liquidity management to boostrap liquidity. Notably thinking of the PALM product by Arrakis where you don’t need to sell tokens upfront to start your position. I think this should be one of the solutions considered here.

But back to incentivization, I would focus on one pool per chain.
Arbitrage volume is a good vanity metric but it’s net negative for LPs and also for swappers who don’t rely on aggregators. I’d focus thus on one pool per chain.

On the type of pool, the choice of whether you do MORPHO/ETH or MORPHO/a USD stablecoin is essentially a question of whether you want to benefit from some price correlation between ETH or not. There’s no good answer in this, and I guess it’ll be up to the appreciation of whether the MORPHO community is bullish ETH or not.

When it comes to the incentivization method, I wouldn’t overcomplexify distribution with tokenomics system likely to confuse users and deter LPs who might want to join. These wouldn’t change the economic value to be distributed to LPs and are more likely to create barriers to enter for LPs who might be interested in participating in the incentive programs.

You may have discussions on the AMM type or AMM formula but in any case concentrated liquidity remains the most efficient and expressive type of AMM. You can have any form of liquidity curve on a concentrated pool. You could aim for an 80/20 pool or a Curve like type of pool.
Some might argue that the UX for LPing in concentrated liquidity is complex, but several arguments against this:

• in any case, LPing in pools exposes users to some risks, so this should not be in any case an activity for unaware DeFi LPs.
• and complexity can be abstracted with liquidity management solutions which create a UniV2 like experience.

If concentrated liquidity is the way to incentivize, then comes the question of what incentivization method to use.
I have personally a bias against bribe type of systems. What makes bribes interesting is a market inefficiency between the value controlled by bribers. As you’re looking to build a long term type of program, it doesn’t make sense to build a whole system around an arbitrage opportunity that may vanish after a couple of months. Historically some bribe systems have held for a while, but using into these systems would just entertain the flywheel for a little longer before it stops. So it mostly remains a short-term plan.

I therefore advocate for direct pool incentivization, and I think that with this Merkl is the best solution to incentivize liquidity in this case. Several reasons:

• You can setup your incentives in order to get the liquidity curve of your choice. You may with Merkl allocate more rewards to LPs who provide more liquidity of one token with respect to another. This can essentially allow you to incentivize LPs to provide liquidity 80% of one token 20% of another token. This can be a nice way to create liquidity walls to reduce slippage for people buying and/or selling.
• Merkl natively integrates many automated liquidity management solutions enabling users to provide liquidity passively and be directly rewarded by the system. With Merkl, everyone can provide liquidity based on its risk tolerance and still be rewarded for it.
• The Merkl frontend is already used by 10s of thousands of active DeFi LPs aware of the risks and complexities of farming in concentrated liquidity positions: Merkl provides an ideal distribution window.
• Merkl will be compatible with UniV4 shortly after its launch so the transition once UniV4 is out will be seamless

While the Morpho DAO could build its own scripts, I think it’d be a lot of efforts to get to something which wouldn’t be at the level that Merkl currently has for concentrated liquidity.
I’ve just insisted on some of the features for the solution, but it’s far more customizable and Merkl provides an ideal playground to fit with the unique needs of DAOs like Morpho.

So my conclusion for what’s best for the objectives stated would be: a mix of PoL to be built over time with smart incentivization of a single pool per chain using Merkl

[rapha-raffaelo]

Following the interesting discussion and the various solutions proposed, I’d like to inform the DAO that Arrakis offers a solution to protocols and DAOs that automatically manages deep DEX liquidity and achieves minimum slippage given the provided capital. Arrakis is live on Mainnet and Base, manages about $115M TVL and is trusted by projects like MakerDAO, Lido, Maple.finance, Stargate, Etherfi and many more.

How can MORPHO’s Goals be achieved by using Arrakis?

• Active Market Making strategies achieve in pool wETH liquidity bootstrapping by leveraging organic trading volume. No liquidity mining incentives are needed and pools can be launched at skewed inventory (e.g. 90/10 for MORPHO/wETH) that are converted to optimal inventory ratios (50/50) without capital loss or negative sell pressure over time.
• Creating multiple factors higher capital efficiency, pools managed by Arrakis are frequently used as price reference for Oracles due to their deep liquidity and high price stability.
• In contrast to liquidity incentives, these vaults are more capital sustainable and provide deep liquidity with the DAO keeping custody and control over the funds. Contrary, liquidity from incentive programs is not sustainable and moves when incentives are terminated.
• Being backed by Uniswap itself, Arrakis built out the future of their protocol on top of UniswapV4 and enables users to seamlessly migrate liquidity after the launch of V4.
• Addressing @TokenBrice point, automated rebalancing of the V3 pool provides all benefits of a V2 type pool (x*y=k) without the cost of high capital inefficiency as it requires a fraction of TVL by achieving the same price impact.
• Arrakis offers a dedicated quant team to support DAOs on setting the optimal pool strategies and provides highly customizable infrastructure and AMM liquidity management strategies.

In line with the suggested steps above MORPHO could use this solution to launch DEX liquidity in coordination with the CEX listing and bootstrap the 50/50 inventory within a few weeks starting from 90/10 MORPHO/wETH while having low slippage at all times.

This approach has worked for various other blue chip tokens before and offers a much cheaper alternative over liquidity mining, while still benefiting from the high Uniswap trading volumes from day one (References can be found here)

[aseem]

Thanks for sharing recommendation. I’m wondering if there is any downside in assuming that MORPHO market cap will be greater than $100M and allocate incentives assuming 35x (or more) multiplier? To be clear, this isn’t a prediction on the market cap - more a way to move forward without waiting the initial period.

If our guess is correct, we have conserved MORPHO tokens via fewer incentives (and greater multiplier). If market cap is lower, we can always propose a second incentive program.

[aseem]

It looks like one decision we have to make is whether to target Uniswap v3 or v4 on Mainnet.

I continue to lean towards starting with v3. Mostly because depending on a massive, external launch (that is completely out of our control) seems like an unnecessary risk to add to our setup.

Even if it launches within the timeline we need, it might take a little while for LPs to feel comfortable with it. Tooling, docs, etc can be a little sparse (even though I know that UF and Labs have been working hard at it). It’s a massive undertaking. I say all this as one who was part of the small Uniswap v3 team :).

When v4 launches, we can plan to move liquidity incentives and help migrate everyone when we are ready. This way, the timing remains in our control.

Edit: I guess one caveat to this if Uniswap v4 launches like tmrw or early next week. Maybe that gives us enough time to evaluate? But anything more uncertain than that and I’d lean towards v3.

[Constantin]

The only question I have is… here farmers get oMORPHO and them redeem them with cash, isn’t it similar to a sale…? if this is acceptable, why not directly arrange a sale?

[NathanVDH]

Glad to see some great discussion here. Building on what’s being said already, there’s a good case to be made that incentive programs should be delayed until the volatility that will inevitably follow the transferability of the token subsides.

As @TokenBrice and Gauntlet noted, the need for initial baseline liquidity both to improve the stability of the token price and avoid manipulation is super important. This also gives some time to the team to focus on the transferability before any kind of liquidity mining occurs (and not have to land two planes at the same time).

When this stability has been reached, I think a ve system that @Hubert mentioned would be very useful in terms of balancing the incentive spend across different venues. From a tokenomics perspective, tying it together with an offchain rewards system like Merkl allows for much more customization of the incentivization and fast experimentation (very useful as this is a notably tricky subject).

At Aragon we’ve built this system for Mode and Puffer with the help of the Merkl team, with a customizable ve-system, gauges, and rewards distribution. It’s live here.

[Jadmat]

Liquidity mining is a simple and fast method to get ready for liquidity startup, and probably the most used in the ecosystem in the last 2 years; but a lot of resources are lost along the way; from program updates with their respective debates, to a lot of capital (dilution) of the DAO.

There are more efficient startup methods, at the capital level, and less damaging to the token; which, if well designed at moment 0, should not require so much intervention/debate later.
To date, we have seen tools like Palm from Arraquis; it has a liquidity startup mechanism that has worked well; but I think it can be done better.

Let’s look at the whole picture, let’s define a comprehensive and long-term plan of action. The way forward is:

1) Price discovery
2) Liquidity start-up
3) Genuine depth
4) Staking: Single Token vs LP
5) MORPHO CDP

We need mechanisms that can sustain themselves (and remain), that are organic and genuine, and that also avoid the dumping that these instances bring.

Implementing hook technology is now an almost natural way forward. Univ4 will allow the implementation of logic on concentrated liquidity pools; this can allow us to design mechanisms that solve each of the previous points.
Let’s design them:

1) Price discovery

It is possible to exit 100% MORPHO, without a secondary token (undoubtedly WETH); under a price configuration (pre-established by the DAO) where we add liquidity immediately after this tick. Apply a Dutch auction mechanism: A type of auction where the price falls over time until a bid is made.

Another alternative, which has many advantages, is the introduction of launch options; after setting an initial FDV, “options” can be set for both the initial sale and future incentives.

• If the price falls below the set price, the options will not be exercised, so the first sale and incentives will not be dumped at an early stage.
• If the price exceeds the established price, some users will execute the option, this generates MORPHO purchases, which can continue with an upward effect, depending on how much is then poured into the sale.
• Execution will generate volume (fees) in the pool.
• Execution will add WETH to the pool, therefore to the POL
• The option allows the user to send less capital than the equivalent if he sent MORPHO.
• In the case of options with a strike, the user earns everything above the preset price, i.e. the liquidity pool receives the price set for each option that the user executes.
• Some variants eliminate the strike and replace it with a discount on the market price, let’s go a little deeper here:
  • Timeless developed a perpetual option mechanism that replaces the strike with a 50% discount on the market price.
  • Contango takes this mechanism and modifies the 50% discount with a variable discount that takes the base seed valuation and then looks at the market price, as long as the market price is above the seed valuation, a discount is applied which, unlike OLIT, is variable based on a curve designed by Contango. An important point here is that no user exercising the option will sell below the seed valuation.

The two methods are not mutually exclusive. MORPHO has already been distributed; implementing oMORPHO as a reward asset and starting the liquidity pool with the auction mechanism is considered the best implementation today.

2) Liquidity start-up & 3) Genuine depth

Continuing with the implementation; points 2 and 3 need a boost. We will achieve this with 2 mechanisms that generate incentive + liquidity strategy.

1. We incentivize the WETH side with an oMORPHO** distribution only to the active range. This should be adjusted in an increasing manner at the time of pool deployment and will start to decrease once the required tvl* is reached.
   These mechanisms allow the target to be reached in a more organic way and without too much loss of resources. This can be achieved with a hook or by using Merkl.

2. We have implemented a keeper that adds/removes MORPHO from the treasury.
   This mechanism will bring a dynamic and controlled depth of MORPHO, maintaining a rebalancing pre-configured by the Dao; this will improve buy operations and reduce slippage. It will help to maintain a healthy liquidity on both sides constantly, which will help the POL to obtain WETH from the demand for MORPHO.

The complementarity of both hooks will bring
Supply of active WETH to (1)ETHBoost, which will activate (2)TickKeepers, sending MORPHO to the Treasury.
A growing TVL of active WETH represents:

• A wall against dumping
• Tick-Keeper sends more MORPHO

These combined mechanisms find boost efficiency, without losing capital efficiency; achieving one without losing the other has always been the Achilles heel of on-chain liquidity.

A key detail, which we will not go into as it is not the subject of this thread, is that both mechanisms allow the Dao to start getting WETH in its treasury, thus starting the solution to the second major problem that Daos present.

*The required TVL is linked to the liquidity needed to make MORPHO a CDP eligible asset, this point will be defined by the risk analysts.

** During the life of the pool, the sending oMORPHO can be replaced by another incentive:

• Pool fees
• Dao fees
• Bribes

4) Staking: Single Token vs LP

This is perhaps the most complex point to define and perhaps deserves its own article. But I will try to be brief, as it is necessary to cover it in order to have a complete overview that will lead us to a clear and focused field of action.
Personally, I believe that the best stake is the one that does not eliminate on-chain liquidity, the depth of a token defines its quality; at the same time, the stake ratio (genuine trust of the holders) defines the quality of the token. So we see that if a token is “successful”, it should have a high stake ratio and at the same time deep liquidity; and this is where the path seems to fork, or perhaps define itself.

If we look back a little bit, I think the best example is:
CRV: a success story in terms of stakes, today 44% of the CRV in circulation is staked.
So we can say that only 56% of the circulating CRV defines the volatility of the CRV; this is equivalent to an asset with half its value, which means we have a much more volatile asset; also less liquid (44% of the supply blocked), which ends up defining it as less quality than it really is.
This can be seen more clearly by people much smarter than me who use this data to define the risk parameters of an asset for the lending market or a minter.

So single token or LP? I will assess the pros and cons of each alternative:
Single Token:
Pros:

• Exposed to MORPHO spot volatility

Cons:

• Higher volatility
• Higher stake means less liquidity, higher liquidity means lower stake

LP Token:
Pros:

• Less volatility
• Swap fees
• Staking success linked to liquidity depth and vice versa
• Staking incentives would concentrate everything the DAO needs to incentivise in a single asset. This requires efficiency of both economic and human resources:
  • VP (to achieve governance growth)
  • Liquidity
    Which is not only and directly linked to MORPHO issues and DAO fees, functionalities such as “borrowing power” and “swap fees” are incentives the DAO does not have to pay for or maintain; and here is a great case of real incentive.

Cons:

• (although I don’t know here) for a long time, taking on debt with Lps has been avoided (if someone can establish context/clarity on this point)**
• The price behaviour of the LP token will not be exactly the same as that of MORPHO.

** As a counterpoint to this point, the characteristics of the LP token lead us to what appears to be a “financially safer” (higher quality) token, as it is less volatile; part of its composition is WETH and also the MORPHO part of the token would have greater liquidity than the other scenario. Here the “technically safer” should be taken ONLY in terms of the defined aspects, since as noted in the previous point, LPs have seen problems when using it as collateral.

Another alternative:
Through hooks, the VP of the single token can be held in a liquidity pool.
Even without the Lindy effect, a hook can allow the VP of the MORPHO that is in a pool to be held. In this way, on-chain liquidity is maintained, and the VP can come from the individual asset or from the asset within the pool; what I am still not sure about here is how the rest of the staking functions would work.

5) MORPHO CDP
I am 100% in favour of the DAO borrowing from MORPHO in POL. These can come from 1) treasury stock, 2) tokens recovered by the keeper or 3) farmed (obtained from the DAO’s participation in the pool).
Surely interesting strategies could be designed with the combination of debt and these 3 ways of obtaining the token.
The CDP will also be made available to users.

Before defining the MORPHO CDP, we need to define what we will use as the stake token, as it would make sense to use it for the CDP.

The MORPHO CDP will have:

• Borrowing power
• Voting power
• DAO fees
• (In case of LP token) Swap fees
• (In case of Single Token) Rehypothecation for Extra Yield Hooks that allow inactive liquidity in the pool to be sent to the MORPHO vault
• (Potential) MORPHO issuance
• (Potential) Bribes (we’ll leave that for another post)

The use of the stake token (LP or individual assets) to incur debt, both for the users and for the DAO, is the happy ending and the main indicator that everything else has been successful. Getting to that point would be a great milestone for the token and therefore the DAO.

One final thought:
The endgame: MORPHOwars
These could be the first wars based on “cdp integration”.
Tl;dr: Incentivise vault managers to maximise the CDP; can use oMORPHO and logic that incentivises managers to earn TVL towards the MORPHO CDP.

Clarifications:
If cross-chain (Ethereum and Base) is introduced, it would also be interesting to define how it will be introduced, as this may impact some of the proposed liquidity strategies.

This has been a comprehensive review of all efficient liquidity mechanisms and their links; I am happy to receive feedback and continue the relevant research.

Linking one of the most interesting protocols in the ecosystem with a tokenomics that is up to par is the only way to take Morpho to the next level.

[metrom]

Hey everyone,

Following the recent discussions around MORPHO token liquidity on DEXs, one key question was around how much rewards to give and for how long.

We want to take this opportunity to introduce ourselves to the Morpho community. Metrom is a liquidity mining platform designed for AMMs, it offers innovative ways to incentivize LPs by incorporating KPIs and goals into liquidity mining programs.

We believe that Metrom can help Morpho DAO achieve its goal of deep liquidity and sustainable incentives through our KPI-Based Distribution model. But before we discuss how we do that, let’s first highlight some of the challenges with traditional liquidity mining.

Current Challenges with Traditional Liquidity Mining

In traditional liquidity mining, rewards are distributed uniformly across all LPs without performance-based goals, based on their liquidity density. This often attracts mercenary LPs—participants who chase high APRs for short-term gains but exit once rewards are claimed. This behaviour can drain liquidity, creating instability over the long run.

Moreover, since incentives are issued in native Morpho tokens, many LPs tend to market dump their rewards, leading to downward pressure on the token’s price—another major problem in conventional liquidity mining programs.

Additionally, bribe-based incentive models introduce complexity, demanding constant monitoring, voting, and managing staked positions. This creates barriers for retail LPs and long-term supporters who genuinely believe in Morpho’s future.

With Metrom, we simplify this process. LPs can participate without the hassle of staking, unstaking, or voting—all while still earning rewards seamlessly. This makes liquidity engagement more accessible and sustainable for everyone.

How does Metrom solve these challenges?

To address these issues, Metrom offers a solution based on KPI-Based Incentives—rewarding LPs in proportion to how well liquidity targets are met.

For example, Morpho DAO could define TVL goals for their LP campaigns. Rather than distributing rewards blindly, the rewards are tied to achieving these predefined goal. If the TVL goal is met, the full reward is distributed. If only a portion of the goal is achieved, the rewards scale down accordingly.

This targeted approach

• Minimizes token waste by rewarding actual progress toward liquidity goals.
• Aligns incentives with the project’s needs, encouraging meaningful participation from LPs.
• Prevents mercenary behaviour by rewarding commitment to long-term goals.

Example: Traditional vs. KPI-Based Distribution

Let’s compare two scenarios:

• In a traditional model, if Morpho sets a $10M TVL goal for a MORPHO-WETH-30bps pool and offers 10,000 MORPHO tokens weekly, but only $6M TVL is achieved, all 10,000 incentive tokens are still distributed, even though the goal wasn’t reached.
• With Metrom’s KPI-based model, if only $6M TVL is reached (60% of the goal), 6,000 tokens (60%) are distributed. This ensures efficient reward use and motivates LPs to reach the target.

By aligning rewards with specific KPIs, Metrom ensures sustainable liquidity without wasting incentives, building a more reliable foundation for Morpho. For a more detailed view of our use cases: KPI Uses Cases | Metrom. We also offer traditional non-KPI model to run campaigns and a mix of traditional and KPI model as well.

Setting Up a Campaign

We understand how challenging it can be to calculate the exact rewards and consider all the scenarios needed to incentivize liquidity effectively. Our goal is to simplify this process so that while the community determines the reward payouts, all the technical complexities are handled behind the scenes. We’ve designed our dapp to be extremely user-friendly, enabling a seamless 1-minute campaign creation process with zero complexity, ensuring that the focus remains on decision-making rather than managing the technical setup.

More about Metrom:

Along with KPI-based rewards, we also support Fee-Based Incentives.

Here’s a quick overview of what we provide:

• Networks Supported: Metrom is already live on Base, Taiko, Mode, and Mantle, with plans to expand to major EVM networks.
• DEX Compatibility: We currently support Uniswap v3 and Algebra DEXs.
• Flat 1.5% Fee: We charge a simple 1.5% fee on campaign rewards with no setup or deployment costs
• Unclaimed Rewards: Campaign owners can reclaim any unclaimed rewards after one year.
• Unmet KPI Rewards: Campaign owners can reclaim unmet KPI rewards after each epoch distribution.
• Audits & Security: We’ve undergone multiple audits to ensure both backend and contract security.

We’d be delighted to host a public demo and answer any product-related questions the community may have, and look forward to collaborating with the Morpho community to build sustainable and efficient liquidity!

Website: https://www.metrom.xyz/
X: metromxyz
Github: metrom-xyz
PoC: Co-Founder: Venky - X: 0xVenky
BD: Swastik Garg, X:iamswastik23

[543]

GM!
I’m Sam from Eliteness, Equalizer, Unified, Debita, eh… a lot of places basically that eat sleep breathe defi 1440x365. And an avid morpho power user (ui and non-ui, vaulted or direct, all levels)

Even though im going to pitch Equalizer Scale (a defi market on base) as a potential candidate, i want to make clear that (at the moment) its Bribe Markets cant support 100s of millions of MORPHO liquidity, but can host something to the tune of about a million, with ease.
Although, with its Liquidity Market, it can house any size of TVLs. just wanted to give readers an idea of the scale of Scale on base beforehand.

Firstly, super agree with Gauntlet. The first 5 weeks or so warrant Zero Extra Incentives. The Volatility is going to be way more than enough to thrive multi-digit APRs for the enterprising farmoors via the Trade Fee Rewards alone.

secondly, if at all the dao decides to go the veTKN route, i’d suggest looking for discounted positions… for places like veAERO with a 2 year lock, you can get on for just 60% (40% discount!). for places like Equalizer (veSCALE) with a 6month max lock, it trades around 80-85% or so. In case of Balancer and Curve, we should definitely run through an L2-protocol like Aura or Convex/Airforce etc to get the biggest bang for the buck through their 2nd layer bribe markets.

Now, to answer "DAO has no ETH to put in “the other side” of a LP, and doesnt want to outright sell its tokens, TokenBrice’s idea of using oTOKENs is good but (like pointed by Constantin) is basically a sale.

for the uninitiated: with otoken models, its basically like we sell our token for x price, where x is usally lower than the market price p. this “option” to buy at a different rate x is give to specific people only in specific quantity, which is what holding an otoken basically means. people pay, for example, $20 to get $100 worth of tokens. some word it as "pay a premium of 20% to be able to buy tokens for free. its not really free since you already paid the 20, so more like a discount, in this case an 80% discount. idea here is to give people oMORPHO instead of MORPHO (or treat the current token as if its an otoken), and then charge some % fees upfront from them, for them to be able to claim their already earned tokens. the fees (premium) paid goes to dao treasury, which it can use for PoL, LP incentives, bribes etc

anyways, it would have to be done Pre-Transferability so that it is price-independent, especially since we dont have an oracle, and price would be super volatile in early days. Also, this way, everyone gets their tokens only if they pay for them. This could also in theory set a floor to how much of the tokens are claimed by a user’s own speculation of whether its worth it or not.
if its done post-transferability, we are basically giving up more MORPHO “value” than originally intended (if were giving a $100m fdv, now we take $20m and give out $120m, which is still a net $100m but dao earns 20m of real ETH/funds). This kinda stirs up the FDV calculator’s implied notions that we all have been pondering upon for … so many long months
but these “options” are a great tool to raise money… if the FDV is say $200M and we give a 75% “discount”, we are basically getting back $50M into our Morhpo DAO’s Treasury! Big W! Use it later to seed a $100m kxy pool, would instantly be in the top 10 of deepest DeFi pools!

second option would definitely be to raise some using MORPHO as Collateral. for this i would say the isolated Time-Liquidation based Loan markets at places like Debita would be best, since they dont need a price oracle. DAO deposits say 25m MORPHO tokens, posts an offer asking for say 200 ETH, with a promise to pay back within some time T, say 6 months. If these 25m tokens are worth less than the 200 ETH, Morpho DAO doesnt need to pay the Loan back! if its still worth paying back, DAO does it, and maybe takes out one more similar Loan for some new time frame! It shifts all the risk to the other side to Lenders, allowing Morpho to raise funds without a need for oracles or “Selling”.

Now getting back to the idea of planting some Liquidity on Equalizer DEX on Base, i would have argued its the best place for Bribing & Raising Liquidity Pools etc, but i know it doesnt have enough “room” in its Bribe market on Base at the moment… Aerodrome is in a much better position to sustain “Bribes” if the dao decides to go that route. (I’m an early velo investor so biased again!)
But what Equalizer brings to the table is waaay above any other DEX can! Bribe markets are not everything…

1. Firstly it does the usual veToken stuff: Bribe $1 Get $2 of emissions thing. Everything mentioned by others for aero applies equally to equal.
2. On Equalizer, to tackle the “bribe efficiency dies sooner or later” issue (as mentioned by Martin_Merkl), the DAO can actually run their own rewards to Equalizer LPs without tapping into the Bribes Market. What this means is that DAO Spends say $10k of MORPHO a week in incentives to MORPHO/WETH pool. The LPs earn MORPHO itself, instead of SCALE emissions from equalizer’s bribe market.
   The Main Benefit ― Morhpo DAO earns ALL the Fees. Yes, 100% of all the Trade Fees that the LP generates go to the Morhpo DAO. Most other places have a “Fee Switch” or a “Fee Split” that deprives non-staked (aka non-participants of bribe market, aka non-farmers of emissions) farmers from 100% Trade Fees rewards and pocket themselves a big chunk. With equalizer as the base amm, Morpho may spend $10k but earns back a Big chunk of it, and more importantly earns the “other side”! Ideally, morhpo can just compound all of it back into more PoL for itself, while decreasing its “LP incentives” proportionally to its PoL growth.
3. Morhpo is a Yield earners paradise. For that reason alone i strongly suggest pairing with an interest bearing token, like wsteth or something similar. Yield is all about optimization imo, add more yield wherever possible. And this LP is a good place to do that! Imagine getting a big part of inflation pie getting set off by merely having paired with these yield-bearning auto-compounding tokens!
4. CL (v3-style liquidity) is also available readily on Equalizer through ALMs (3rd party managed Liquidity vaults) such as Gamma, Ichi, Steer, etc. with a capacity to onboard anything like Arrakis/palm to its Bribe Market and/or Liquidity Markets very easily.

Again, the Bribe Market on Equalizer Scale is not that big, but its Liqudity Market is unlimited. While the DAO can easily host a $1m LP with the Bribe $1 get $2 route, the DAO can also provide MORPHO directly to LPs at any scale to build up MORPHO liquidity pools, and in return earn 100% of Trade Fees for its treasury. This route is scalable to any tvl number. And this includes the CL.

And finally, the Oracle.

For this, I want to point towards the novel TWAR Oracle solution provided by Equalizer, developed by Andre Cronje. Its totally flash-proof and manipulation resistant. What’s more, a consumer can request (fully-onchain) Fine-Grained price-vs-time data, custom to their request, tailored to their desired windows. Its fully on-chain, ticks each block, so theres zero latency or price lags there. And of course, its free of cost. Just needs a Liquidity Pool on Equalizer!
Right now, this oracle is securing 10s of millions of Leverage positions, running smoothly since the last 2-3 years. Equalizer’s partners like Impermax and its forks like Tarot make extensive use of our TWAR orcales to process Liquidations securely.
With that, MORPHO holders also get a place to Lend MORPHO (at a place other than Morpho itself). And people can also borrow against their MORPHO LPs with ease. Another thing to note here is that if someone is borrowing, they will have their underlying LPs working to pay off their Loans! (this part is what i really love the most about this!)

btw, back at elite we are building ELMA (beta stage rn), a Lending Market Aggregator, and our Morpho Vaults are a work-in-progress at the moment. So all in all, MORPHO token is going to make its way into all of the 3-4 platforms i mentioned above like Equalizer, Eliteness, Debita, Impermax, as all of them have already decided to wholeheartedly support MORHPO token with full integrations, whitelistings, enabling as collateral,etc right from Day 1 of transferability.

tbh I find morpho at the innovative end of the defi spectrum and see it natural for it to have presence on many other projects, getting a direct access to the untapped userbases, especially on chains like Base that have Retail as their top focus. so reaching more and more people and communities is, imo, a Key to success in the post-transferability era for Morhpo, especially for Morhpo DAO.

[OneTrueKirk]

Given the recommendations by @Gauntlet and @543, as well as some conversations I’ve had outside the forum, it seems appropriate to wait on public incentives until several weeks after the transferability event (proposal now live on Snapshot). This time will provide data needed for an objective budget based on observed market conditions.

It seems like a good idea to use Uniswap on mainnet and Aerodrome on Base, but we should revisit this decision once we observe where trading is happening after transferability.

One feedback I’ve received that is worth noting is that, while it might not be the most efficient, a full range liquidity option would help mitigate against illiquidity risk (ie, all the liquidity is consumed by a single large buy or sell) and facilitate price discovery during higher volatility periods.

While this thread will naturally remain open for comments, I suggest we pick up the discussion ~3 weeks post transferability and hold a vote once there is consensus about the desired budget. We can then have two separate snapshot votes, once to decide on a total budget, one to choose a single DEX per chain (can consider adding more than one in the future, but makes sense to stay focused at launch).

[Tane]

Thank you to everyone involved for this insightful discussion.
There are numerous promising strategy ideas here, and we truly appreciate the thoughtful contributions.

At the moment, we support @OneTrueKirk’s idea.

@OneTrueKirk

it seems appropriate to wait on public incentives until several weeks after the transferability event (proposal now live on Snapshot).

We believe we should

• finalize the POL strategy design and execute it first
• analyze the situation including the effect of the POL strategy after a few weeks of the token launch
• design a liquidity mining incentive based on the analysis above

This is because

1. deploying a liquidity mining program too early might not be very effective.
2. the POL strategy doesn’t require as much cost as a liquidity mining strategy, as some of its costs can be offset.
3. it would also allow us to design a clear liquidity mining program with the insights obtained.

The point 1 and 2 are described by @Gauntlet

@Gauntlet

However, our estimations show that the program does not account for the initial volatility following launch. Gauntlet recommends transitioning to an LM program after one month to allocate incentives efficiently.

@Gauntlet

Loss Versus Rebalancing (LVR) is the primary cost for the POL strategy. LVR depends on volatility; empirical models can estimate this cost (see here). These costs are offset by fee yield, which depends on volume.

For point 3, we don’t think we need additional explanation on this.

In this way, we should also be able to maximize the synergy between the two initiatives that share the same objective of deepening liquidity, allowing us to use resources effectively.

[Tane]

Here are some other points that we wanted to raise:

1. We should consider specifying a timeline to review the deployed strategy when this DAO is to vote for determining liquidity mining incentives.
   This is important because we recognize the need to discuss updating this strategy, especially after concerns regarding Uni v3 and potential better strategies like the one involving Aerodrome as described by @TokenBrice.
   This could be particularly important when the POL strategy requires updates, though the transition may not be straightforward.

@TokenBrice

Acquiring AERO to lock as veAERO and secure incentives to MORPHO/ETH on Base
The first and most obvious is for the protocol to secure a veAERO position, allowing it to direct AERO incentives to the MORPHO pools on Aerodrome and earn its share of the trading fees these pools generate.

2. Decisions regarding oMORPHO and the token launch auction should be based on Morpho’s overall financial situation.

Although oMORPHO can earn some ETH or USDC to the DAO with this strategy, due to its complexity, some users might choose not to purchase MORPHO. This could potentially negatively affect our efforts to deepen MORPHO’s liquidity. If Morpho already holds sufficient ETH and USDC, making MORPHO difficult to obtain may not be reasonable.
Considering that a certain level of fundraising has already been conducted, whether that’s insufficient should be the focal point of discussion. Otherwise, this tradeoff doesn’t seem easy to be justified.

3. While staking potentially affects the token price, there’s no need to rush a conclusion regarding staking.
   It seems to lack a decisive reason to introduce staking.
   Unlike Aave, which internalizes risk and thus requires a safety module, Morpho does not internalize risk. We are not so sure if this is necessary from a security standpoint.
   The current voting system for Morpho is designed without requiring staking. Unless bribery is anticipated, mandating staking for governance participation may not have a significant impact on the price.
   While distributing DAO funds through staking might be considered in the long term, it’s not a conclusion we need to rush into at this time, as this comes with a huge cost.
   Here is our view on each strategy,

• veTokenomics does not seem very desirable due to concerns about transferring governance authority to external parties like Convex.
• LP token staking or allowing staked MORPHO tokens to be used for liquidity provision is interesting but also depends on the purpose of implementing staking. The latter is described by @Jadmat

@Jadmat

Another alternative:
Through hooks, the VP of the single token can be held in a liquidity pool.
Even without the Lindy effect, a hook can allow the VP of the MORPHO that is in a pool to be held. In this way, on-chain liquidity is maintained, and the VP can come from the individual asset or from the asset within the pool; what I am still not sure about here is how the rest of the staking functions would work.