Earn and Borrow

The integration of Morpho and Euler vaults and markets into Oku marks a major milestone in delivering a seamless and powerful DeFi experience all under one roof. By combining DeFi meta-aggregation with industry leading lending and borrowing infrastructure, users can access frictionless money markets directly on Oku.

What is Morpho?

Morpho is a decentralized lending protocol that enables over-collateralized borrowing and lending of crypto assets across EVM-compatible networks. It acts as a trustless, composable layer for DeFi lending where users can deposit assets to earn passive yield or borrow against collateralized positions. Built for transparency, efficiency, and modularity, Morpho allows for both ease of use and flexibility for advanced strategies.

Key Concepts of Morpho

Lending in Morpho involves:

• Collateralization: Users provide collateral to borrow other assets

• Risk Management: Liquidation mechanisms protect the protocol through loan-to-value ratios

• Interest Accrual: Dynamic interest rates based on market conditions

• Open Participation: Anyone can lend or borrow through the protocol

• Non-custodial Design: Users maintain ownership of their assets at all times

What is Euler?

Euler V2 is a decentralized lending protocol that enables over-collateralized borrowing and lending of crypto assets across EVM-compatible networks. It acts as a trustless, composable layer for DeFi lending where users can deposit assets to earn passive yield or borrow against collateralized positions. Euler V2 powers lending markets on Oku where its cross-vault composability and flexible governance model offer advantages for specific asset types and strategies.

Key Concepts of Euler V2

Lending in Euler V2 involves all the same functionality as Morpho including the EVC (The Ethereum Vault Connector) permitting integrators to build and automate multi-step workflows across multiple vaults.

• Cross-Vault Composability: Collateral deposited in one vault can back borrowing in another, a capability unique to Euler V2

Vaults & Markets

Let’s begin by explaining the difference between Vaults and Markets

Vaults

Vaults are yield-generating accounts that allow users to deposit a single token to be managed by a curator. The curator of the vault allocates capital across various markets in accordance with associated risk strategies to generate sustainable yield for the depositor. Users retain full control over their assets and *can withdraw their liquidity at any time.

*Ideally, liquidity is always available for withdrawing. It's important to note the utilization rate of the vault, which is typically set between 85-90%. This ensures idle liquidity exists within the pool in the case of high-demand withdrawals. In the event that liquidity runs out while you are trying to withdraw, you may have to wait until borrowers repay their loans, or until new depositors add liquidity.

Vaults are:

• Simplistic – Users don’t need to micromanage capital allocation.

• Flexible – Assets can be withdrawn at any time.

• Curated – Managed by experienced curators to optimize yield and risk.

Think of vaults as your passive yield engine - one click deposits and actively managed behind the scenes

Markets

Morpho Markets are isolated lending pools that pair one collateral asset with one loan asset.

Each market is:

• Immutable – Parameters like LLTV are fixed at creation.

• Isolated – Risk is limited to the specific market.

• Transparent – Clear conditions for lending and borrowing

• Simple – One collateral asset, one loan asset per market

Example: An ETH/USDC market allows users to borrow USDC by providing ETH as collateral, under specific risk conditions.

Key Concepts

Liquidation Loan-To-Value (LLTV)

LLTV defines the maximum borrowing capacity in a market. For instance, if a market has an LLTV of 80%, a user can borrow up to $80 for every $100 in collateral. If the value of their collateral drops or their debt rises beyond this ratio, the position is at risk of liquidation.

Liquidation

Liquidation in DeFi refers to the process whereby a user's collateral is sold off to cover a loan when the value of that collateral falls below a certain threshold. If the loan value declines below the LLTV, the user's collateral will be liquidated to protect lenders and allow them to withdraw their initial contribution of capital.

A position becomes liquidatable when:

• Collateral value decreases

• Debt increases due to accrued interest

• A combination of both factors

Example: If a borrower provides $100 of collateral in a market with an LLTV of 80%:

• The position is safe when the borrowed value is <= $80

• The position becomes liquidatable when the borrowed value > $80

An LLTV of 80% provides lenders with an amount of wiggle room (20%) between the point of liquidation and where their collateral would depreciate in value

For a detailed breakdown of liquidation mechanics with calculations and examples, please visit https://docs.morpho.org/build/borrow/concepts/liquidation

In the event when a position becomes liquidatable, an external third party - a liquidator - can repay part or all of the borrower’s debt in exchange for an equivalent amount of collateral plus a liquidation bonus.

Curators

Curators are individuals or entities that manage vault strategies and optimize risk-adjusted returns for depositors. They decide which markets a vault allocates to and adjust parameters to maximize yield while maintaining safety.

Key Responsibilities of a Curator:

• Market Selection & Management: Evaluate and select appropriate markets based on risk-reward profiles, actively manages caps and maintains market health

• Rate Optimization: Balance lending and borrowing rates to maintain competitive yields for depositors while attracting borrowers

• Liquidity Allocation: Strategic distribution of vault capital across markets

• Risk Monitoring: Assess collateral quality, oracle reliability, liquidation feasibility and on-chain liquidity to protect against bad debt events

• Communication: Provide transparency around strategy and risk parameters

Curator's typically assign a performance fee to capture a portion of the yield generated by the vault. This fee is not charged on user's deposits or rewards, but collected on the interest from the vault

Rewards

Rewards for contributing capital to a vault can be claimed directly on Oku through the Earn Positions tab near the bottom of the page.

Merkl Rewards

All yield opportunities using Merkl as a rewards distribution system are listed on app.merkl.xyz. Rewards using Merkl occur at a frequency dependent on the chain, though on average are distributed approximately every 9 hours. Here's a link to a useful dashboard that tracks updates of user-based rewards across all chains with active campaigns.

Earn USDC with boosted Merkl rewards through the Moonwell Flagship USDC vault

There may be occasions where Net APR is negative. In this case, users are incentivized to borrow capital against their collateral. Paid to borrow money, you say...🤑

Below is a summary table explaining the differences between both protocols

	Morpho	Euler V2
Market structure	Each market pairs exactly one collateral asset with one loan asset	Each vault holds one loan asset but can accept multiple collateral types via the EVC
Cross-vault collateral	Not supported natively; each market is fully standalone	The EVC allows collateral in one vault to back borrowing in another
Immutability	All markets are immutable after creation	Governed vaults can be updated; ungoverned vaults are immutable
Liquidation mechanism	Standard liquidation with a fixed incentive	Reverse Dutch auction where the bonus increases over time, typically resulting in lower penalties
Vault aggregation	Morpho Vaults allocate across multiple Morpho markets	Euler Earn vaults allocate across multiple EVK vaults and can include external ERC-4626 vaults
Governance flexibility	Markets are always ungoverned; governance exists only at the vault/curator layer	Individual vaults can be governed or ungoverned, giving deployers a choice per market