So what we see on Morpho is kind of a connection between the teams that you guys work with, but also products that you guys are bringing to market, right? So then how do you kind of vet those that are building on top of Morpho or using your technology to then, like, launch products?

So I like to think of the Morpho ecosystem as, like, two layers.

You have the...

So the Morpho technology is, like, the core piece of code that's gonna connect the lenders and, and the borrowers.

It's quite raw as it is.

It's hard to use, et cetera.

So this is why you have operators of, of, of, of the network that are gonna do some underwriting, uh, that are gonna curate vaults and, and make the experience smoother, uh, et cetera.

Yeah.

Is it about variable rates versus fixed rates? Uh, is it focused on different customer segments? Like what, what, what do you look at as the difference between the two?

Yes.

So here's the thing.

We, as we said, we wanna become the open credit network for the world.

Credit is big.

Credit is $200 trillions of dollars across many categories of obligations.

You have state obligations, for example, or you have consumer loans, or you have financing on the back of receivables.

Is that sort of also where you think that as this industry gets more tokenized, that, that it, it opens doors for people that didn't have before?

Why have you guys been able to crack this and others have not?

It's a great question.

I think there is a product understanding problem, uh, at the time, and there was, like, some technical challenges that, and time to market element that were hard to solve.

So I think from a product perspective, it's important to understand that surprisingly, the reason we built a fixed rate protocol is not to get the fixed rate.

It's to have control on the rate, which is a slight nuance, is, like, we wanna give the user the ability to set their rate, right? Because today the rate varies according to an arbitrary formula, right? It's a formula, it works according to some market conditions.

Uh, but, but it is a formula that is arbitrary.

Um, whereas if you talk to large financial institutions that want to control their risk, they also want to control their rate.

Yeah.

Please build it," and that's what M- Morpho Blue is.

Yes, I think pretty much.

I, I like the way you, you, you, you explained that, is in the early days of DeFi, basically you had multiple constraints.

Gas was high, and also the set of users that was interacting with the chains was basically users with their MetaMask wallet that had a little bit of money, and they were n-in no way financial experts, right? So basically, the protocols initially had to internalize a lot of the complexity in order to provide a passive experience to users, and they could not rely on any other intermediaries to do that, right? So this is why the early versions of Uniswap, for example, is passive both on the LP side and on the trader side, right? You do, can do passive LPs on Uniswap V2 and, and passive trading.

This is why Compounds or, or, or Aave manage the risk for you.

They manage the rate for you.

They manage everything for you, right? But as the ecosystem grows, and, like, the complexity of the players, you know, they're more and more complex and understand they want more control, right? And so as a DeFi protocol, you have an interest in modularizing some parts of your, your code and, and the, of the responsibilities that you have, and leave it to the market, because the market will price it better, and it will scale much more because it'll be able to discover much more use cases.

I wanna set that for myself."

Maybe just t- to start, Paul, give us kind of your lay of the land of these mega trends and, you know, perhaps a bit more focused on vaults, and just generally, uh, what your current mental model is for, uh, why this is catching on right now and kind of what these exports are doing for the industry.

Sure.

I think, you know, in general, the r- the realization of the last year or even the last six months as an industry is that crypto really isn't anymore here as a speculation product, but more as infrastructure.

Like everybody...

We, we really made the switch from product to infrastructure for, for everybody, whether that's us as builders, but also fintechs, TradFi institutions, et cetera.

Now it's, like, widely understood that, you know, moving to an open financial system on open rails is inevitable.

It will happen.

How do you think about the evolution of, um, Midnight and Morpho? Is it similar to where, you know, you start with kind of like, like the basic stuff and you move down the risk curve or down the, you know, esoteric curve for lack of a better term? How do you think about how this product might play out?

So what are your thoughts on the evolution of the role of curators in Morpho? What is next? How do you continue to grow trust from institutions so that more capital can come on chain so that when they tokenize their traditional assets, what happens when they start tokenizing trillions and they're bringing that on chain and they want to bring that into morpho infrastructure?

So I guess the CLDR is that, yes, the landscape is going to change massively.

The way I like to think about it is that, you know, DeFi protocols should not operate the financial services.

DeFi should be pure piece of code, pure protocol, and externalize any operations to, you know, the so-called curators, right? And this was like the basic idea of MorphoBlue.

And we'll talk about it in a second.

But with Midnight, you have the idea that we're externalizing not only the risk management, but also the rates and the term.

And once you have this in place, you need those assets managers or operators, curators to come in and do the hard work of the underwriting, right? And just like in traditional finance, we are looking to underwrite 8 billion people, right? Like that deserves credit.

So yeah, what is this solving for the world? We're stepping up past DeFi now.

How have you seen that play out in Morpho? What do you see playing out in the future as we go forward around the Morpho stack and RWAs?

Right.

So RWAs for Morpho is the fastest growing segment of, of You know, we have thousands and thousands of lending markets on Morpho.

I think we have like 1,300 different vaults and tens of thousands of lending markets, right? And initially it was mostly, you know, crypto back loans, right? Bitcoin back, like people that had Bitcoin and wanted to borrow on the back of it.

But Morpho does not aim to only do crypto loans.

Like we want to do any type of loans.

You know, our mission more generally is to be able to fund like any type of ambitions and, you know, enabling them with open access to capital, right? And that means we want to bring in the MorphoStack any type of loans.

How do you see that playing out? Do you see any role in RWAs around V2? What really excites you, I guess, around that?

What effect are you seeing that the Kelp DAO attack and, and the ensuing DeFi contagion is having on institutional appetite for these types of arrangements?

Right.

Well, you know, th- th- when, when the Kelp situation happened, um, the first thing I thought, uh, and like, you know, when, when Aave went illiquid and, like, had, you know, $12 billion blocked, I, you know, I, I felt good about Morpho because of how Morpho operates and, and its position, but I was, like, worried about the institutions reacting to this.

Because in traditional finance, when if you freeze more than $10 billion for a week, like, this is a very serious issue, right? And, and so I picked the phone and I started to call them, and I was like, "Hey," you know, explaining what's going on, and so that, you know, making sure they understand, um, the, uh, what, what, what is happening.

Um, and I think, you know, I was actually...

There's, there's a positive thing and a negative thing, right? The, the positive thing, two positive things, is they understand that this technology is the future, regardless of, of, you know, what's happening on-chain.

They understand, like, having an open global financial system is a prom-promise that is way too big to fail, right? Like, this, it, it...

So I was wondering like, you know, how is Morpho adapting in this sort of new era? Um, and I, I'm sure there's probably some aspect that you may not want to reveal, but I'm just curious like, you know, how are you thinking about how to make sure everything, you know, stays secure and your users stay safe?

What are your thoughts on adding Tether in particular and other stable coins outside of USDC?

Yeah, I guess it's interesting because for a long time, USDC had been the vastly dominant player when it came to US institutional adoption.

And it's actually pretty new for USDC to win some of those partnerships and adoption into the fintech space.

It's pretty obvious this is going to be a very wide variety of stablecoins for quite some time in the coming years.

And obviously USDT over the many years of existence have accumulated very, very strong balance sheets and have the capital that is necessary to basically continue to propagate the network and accelerate it in very vast ways.

But the good news is that the time is absolutely insanely huge.

It's like the entirety of the money supply, basically.

Can you explain what happened here and sort of what some of the challenges are with bridging, with staking tokens and some of the interconnectivity that exists in DeFi?

So explain how you came to the decision to do it that way and explain how you think it kind of addresses some of the issues that we're seeing with these data structures currently?

Sure.

So a few comments on what you said.

So I guess the first thing is, so by the way, I don't think Aave as a competitor to Morphile.

I know a lot of people like to compare the two because there is a word lending somewhere, but I think of Aave aspiring to become like the GP Morgan of the world, whereas Morphile aspires to become infrastructure for GP Morgan.

Compound was a competitor to Aave.

Now Compound builds on Morpho, for example, and has some vaults, typically.

How do you protect against that?