Morpho Markets V2: The "Master Router" Solution for Liquidity Fragmentation
Question: Where Does Fragmentation Come From
DeFi lending has long relied on 'isolated markets' and on-chain asset pools: different collateral types, different LTVs, different compliance levels, and even different chains each occupy a portion of TVL, leading to fragmented capital, discontinuous interest rates, and institutions finding it difficult to obtain large liquidity in one go. Morpho V1 itself exacerbated this phenomenon because each Market is an independent contract. Official estimates suggest that up to 30–50% of capital may be idle.
Mechanism: How V2 Merges Fragmentation
1. Intent-Based Global Order Book
Lenders only need to 'provide liquidity' once to cover infinite conditions; borrowers publish intentions containing interest rates, terms, and collateral combinations, which are aggregated and matched by Solvers and settled on-chain, completely abandoning the 'pool-based funding' model.
2. Public Allocator's JIT Routing
As a protocol-level 'funding router', the Allocator automatically withdraws liquidity from idle markets to supplement the target market when borrowing transactions are triggered, achieving Just-in-Time (JIT) liquidity replenishment; each flow is subject to Flow Cap and risk whitelist restrictions, ensuring both safety and efficiency.
3. Aggregation and Amplification of Vaults V2
Vaults split user deposits among multiple Adapters: they can continue supplying V1 isolated markets and inject liquidity into V2 fixed-rate order books; realAssets() reports total assets in real-time, allowing the Curator to dynamically control positions based on absolute/relative limits, forming a three-stage liquidity model of 'aggregation → amplification → withdrawal at any time'.
4. Compliance and Cross-Chain Unification
V2 makes KYC gating an optional contract-level filter, eliminating the need to issue a separate compliant stablecoin; intentions can declare 'whitelisted addresses only' while sharing pool assets, resolving the 'compliant pool vs. non-compliant pool' divide. For cross-chain aspects, intentions can specify different settlement chains, with Solvers using bridges for final settlement, achieving 'one pool across chains'.
Effect: Dual Improvement in Efficiency and Scale
TVL Amplification: After the release of V2, total deposits rose from approximately 6 billion USD to over 9 billion USD, with officials attributing 50% of the increment to the capital reuse brought by 'aggregation + intent'.
Interest Rate Convergence: Borrowers achieve greater depth through cross-market matching, with average spreads narrowing by an additional 20–30 bp compared to V1.
