Overview
Vaults pool your deposits and allocate them across lending markets. You receive vault shares (ERC-4626) representing your share of the underlying assets and yield.Benefits
Curated risk profiles
You choose vaults that match your goals and risk tolerance. Unlike a single mixed pool, vaults expose you only to the strategies and markets the Curator has selected.Permissionless infrastructure
Anyone (individual, DAO, or protocol) can create and manage vaults with different risk parameters and strategies, giving you many options.Non-custodial architecture
You keep full control of your position. Allocations and vault logic are on-chain and transparent.Automated yield generation
Vaults reinvest yield and rebalance within their strategy so you don’t have to manage positions manually.How vaults work
Curation and market selection
The Curator sets risk boundaries: which Morpho V1 markets the vault can use and a supply cap per market. All changes to these settings go through a timelock.Capital allocation
The Allocator manages day-to-day allocation. They maintain:- Supply queue: Order in which new deposits are allocated to enabled markets.
- Withdraw queue: Order in which capital is pulled from markets to satisfy redemptions.
Deposits and withdrawals
When you deposit, the vault allocates assets according to the supply queue and market caps. When you withdraw, it sources liquidity from markets in the order of the withdraw queue.Roles and responsibilities
- Owner: Top authority; appoints Curator and Allocator; sets vault-wide settings (e.g. fees).
- Curator: Selects which Morpho V1 markets the vault can use and sets supply caps. Changes are timelocked.
- Allocator: Manages supply and withdraw queues and reallocates among approved markets.
- Guardian: Can revoke pending timelocked actions from Owner or Curator as a safety check.
Risk considerations
When integrating vaults, help users understand:Smart contract risk
- Vault contract: Bugs could cause loss.
- Underlying protocols: Morpho markets the vault uses have their own risk.
- Upgradeability: Changes to vault or protocol contracts can introduce new risk.
Market risk
- Asset price: Underlying assets can lose value.
- Interest rates: Returns vary as market rates change.
- Liquidity: Withdrawals may be delayed when demand is high.
Curator risk
- Strategy: Poor Curator choices can hurt performance.
- Concentration: Heavy allocation to riskier markets increases loss potential.
- Governance: Incompetent or malicious Curators can create operational risk.
Operational risk
- Oracle: Price feed manipulation or outages can affect the vault.
- Liquidation: Leveraged strategies may face liquidation in underlying markets.
- Regulatory: Regulation may affect DeFi availability or operation.