$MORPHO aims to reduce this spread and improve capital efficiency in a few key ways
Peer-to-Peer Matching: Morpho introduces a P2P matching engine that attempts to directly connect lenders and borrowers who offer competitive rates. When a match is found, the interest rate can be more favorable for both parties compared to the pool rate.
Optimized Rates: By facilitating P2P matches, Morpho can offer optimized interest rates that are closer to the market rate, benefiting both lenders (higher APY) and borrowers (lower APR).
Leveraging Existing Liquidity: Instead of creating a new, separate liquidity pool, Morpho sits on top of protocols like Aave and Compound. This means users still benefit from the deep liquidity and battle tested security of these underlying protocols.
If a P2P match isn't immediately available, or if one side of a P2P loan needs to be closed, the funds seamlessly revert to the underlying pool, ensuring continuous liquidity and operation.
