#morpho $MORPHO
@morpholabs
cointag
To be honest, the DeFi lending sector has been bustling these past two years, but have you looked at the actual results? Projects that can achieve both high yields and solid risk control can be counted on one hand. Most are still stuck in the stage of making grand promises, and the most critical underlying issues—low capital utilization, distorted pricing mechanisms, severe risk contagion, and misaligned incentives—have never truly been resolved.
Morpho has chosen a slightly different path: instead of pursuing flashy innovative concepts, it dissects these stubborn problems one by one, using the most straightforward yet robust methods to fix them.
**Four Major Flaws of Traditional Lending Pools**
Let’s recall whether we always feel something is off when using those DeFi protocols? The root cause ultimately boils down to these few hurdles:
**Idle Capital Waste**: Mainstream asset pools are overcrowded, while niche assets are left untouched, resulting in vast sums of money lying idle, diluting everyone’s interest earnings to a pitiful level.
**Severe Interest Rate Distortion**: Relying on algorithms to forcibly match supply and demand leads to a suppression of borrowing costs that should be high and an inability to elevate deposit returns that should be low; the entire pricing system is distorted.
**Risk Contagion**: Stuffing various assets into a single large pool means if any particular asset crashes, it’s like a domino effect, with the liquidation chain reaction affecting everyone.
**Misaligned Incentives**: In order to boost APY data, users and funds flock into high-risk pools, while project teams frantically distribute subsidies to scale, and when the bubble bursts, no one can escape.
**Morpho’s Solution: Precise Matching + Safety Net Mechanism**
In simple terms, it’s about first directing funds to the right places, and then establishing a safety net.
