Over the past two years, Azu, who has been closely watching the lending sector, has noticed something quite obvious: the vast majority of protocols are trying to find ways to "add new features and pile on new narratives", but very few have cleaned up their old products and risks layer by layer. Morpho is one of the few teams willing to gradually dismantle and reconstruct their old architecture during the transition between bull and bear markets, and recently, this round of rhythm has moved from product upgrades to the deep waters of governance and security frameworks. Reviewing Morpho's blog timeline, from Morpho Blue, Vaults, to Vaults V2, Coinbase integration, RWA Playbook, a whole narrative is slowly coming together, and you will find that they are indeed pushing the "lending protocol" towards the direction of "public financial infrastructure".
If you have experienced the early Morpho Optimizer era, you will know that the essence of the gameplay at that time was to 'improve efficiency' for established pools like Aave and Compound, refunding a portion of the intermediate 'interest spread tax' back to users through peer-to-peer matching, and this layer is now being systematically dismantled. The latest MIP 120 directly writes the 'final shutdown time' for Compound V2 and Aave V2 Optimizer: because these two underlying protocols are also abandoning the V2 version, Morpho chooses to completely clean up this part of the stock before December 1, 2025, and clearly states 'if individual users suffer losses during the final phase, they can contact the association for assistance.' This detail is seldom mentioned, but in my opinion, it is a rare instance of 'proactive responsibility' in DeFi: not shutting down products impulsively, but writing out the stock amount, shutdown logic, and liquidation risks thoroughly in the governance forum, and giving users enough time to migrate. This approach is actually friendly to old users who are still stuck in the old pools.
Gently 'sending off' the Optimizer line is to free up narrative capacity for Morpho Blue and Vaults. Looking at GitHub's README, it is actually very clear to understand the positioning of Morpho Blue: it is a minimalist foundational lending primitive that only does three things—creating markets, bookkeeping, and calculating interest. All risk choices and yield strategies are done in the upper layers of Vaults, market creation is completely permissionless, interest rate curves can be customized, oracles can be changed, and the protocol itself remains non-upgradable and minimally governed. For someone like Azur who enjoys tinkering with strategies, this means you can create many products with completely different risk-return curves on a unified protocol layer, without worrying that one day someone will upgrade the contract with one click and ruin your position.
The problem is: when you truly achieve 'completely permissionless', risks can also grow wildly like weeds. Morpho has chosen not to block this with censorship, but instead added a 'risk red line' at the interface level. They made an interesting update in 2024: while keeping Morpho Blue and MetaMorpho contracts completely permissionless, the front end added three levels of risk warnings: red, yellow, and black. As long as a market's collateral assets, borrowing assets, oracles, or Vault managers are not on the 'approved list', they will be directly marked with a red risk label, requiring users to 'check and confirm before continuing'; if it is just an abnormal parameter, a yellow soft warning will be given; issues involving obvious fraud or legal problems will be blacklisted and not displayed on the interface. In this way, the protocol layer can still allow anyone to open a market, but ordinary users will intuitively see whether this is a 'main street store' or a 'small alley mahjong parlor', significantly reducing the information gap.
Looking further into Morpho's security system, you can understand why so many institutions are willing to stake their brands on this stack. The official long article on 'institutional-grade infrastructure' has made security almost a layer 'prior to the product': establishing a complete Security Framework from the very beginning, doing formal verification throughout the entire chain, engaging top auditing teams like Spearbit and OpenZeppelin for 'circular audits', and after going live, setting up a vulnerability bounty pool at the level of 2.5 million dollars, even explicitly proposing 'non-upgradable and minimal governance' to avoid incidents where an upgrade could break the entire integration chain. For traditional financial institutions or fintechs under significant compliance pressure, this kind of commitment of 'I guarantee not to change the logic recklessly' is more valuable than simply offering high APY.
After establishing security and governance, the network effect has the opportunity to truly take off. The Morpho Effect series monthly report provides many cold but visually appealing numbers: by September 2025, the scale of active loans on Morpho has more than doubled compared to May, Coinbase's crypto collateral loans empowered by Morpho have exceeded 1 billion USDC in just six months, and the deposits of ecosystem products like Katana are also rapidly increasing, even leading to situations where 'certain Vaults account for more than half of the total deposits of the entire ERC-4246 standard Vault'. More exaggeratedly, the World DeFi line has brought lending services to tens of millions of World App users in just six months, and the separately counted deposit scale has also exceeded 100 million US dollars. Looking at external data platforms, the statistics for Morpho's TVL are already 'multi-chain totaling billions of dollars, second only to Circle's entity that issues USDC on Base', it can be said that this lending stack has grown from 'a DeFi project' into 'a public service across several public chains'.
Behind these growths, there is actually a very simple design philosophy at play: what Morpho wants to do is to create a 'lending version of the underlying Internet protocol', rather than a single To C application. So you will see a bunch of seemingly 'boring' governance proposals: migrating reward distribution to Merkl, planning OP funding for USDC growth on Base, designing a more sustainable incentive structure for MORPHO, bridging tokens to Arbitrum using LayerZero, migrating Adapters to the new architecture... These things are hard to tell as short-term positive stories, but for teams that really want to build their business on Morpho, they are the key details of 'can we confidently place bets for 5 years'.
From an ordinary user's perspective, Azur's deeper experience during this period actually comes from the process of 'dealing with historical burdens'. I myself had a small position in Optimizer early on, and after seeing MIP 120, my first reaction was 'I need to sort this out seriously'. Following the proposal rhythm, first, list out those positions still hanging on Compound V2 and Aave V2, understand the target shutdown date, and then choose the assets to migrate—whether to move directly to Morpho's native Blue market or to let a professional Curator manage the Vault for you. In this process, you will clearly feel that the protocol has already clarified all the risks that should be mentioned, and the rest is to see whether you, as an on-chain user, can take responsibility for your own assets, rather than expecting someone to maintain an 'official compatibility layer' indefinitely.
If you are just about to get into Morpho now, or if you have only worked on other lending protocols before, my advice would lean towards being 'more pragmatic'. First, open the interface, scan the market list from high to low, don't look at APY first, but check for risk warnings, especially red warnings. If you are hearing about the assets, oracles, and interest rate models for the first time, then just pretend you haven't seen anything; yellow warnings can be carefully evaluated based on your understanding of the project. Second, if you are not a professional risk controller, try to focus more on selecting the Curator of the Vault and the strategy logic, rather than rushing into niche markets for high leverage. Morpho itself is designed for 'packaging complex risks for a few professional players', and ordinary people can more easily act as LPs who 'hand over money to those who know the business'. Third, pay attention to the governance forum's MIPs, especially proposals related to rewards, cross-chain, and adapter migration. Sometimes a passed MIP can have a greater impact on the yield curve of the Vault you hold than market sentiment.
From Azur's perspective, what I care about more is not whether Morpho can produce any 'new narratives' next month, but whether it can complete this seemingly counterintuitive route of 'non-upgradable, minimal governance, and security-first'. For a lending protocol to survive one cycle after another, it has never relied on one-time high yields, but rather on whether it can slowly accumulate a sense of trust among users, institutions, and regulators that 'I don't have to monitor it every day'. Many of the things Morpho is doing now—whether it’s rhythmically shutting down Optimizer, or locking risk tags on all markets at the front end, or abstracting asset management with Vaults V2—are all paving the way for this image of 'long-term no surprises, but also not scary'. For those who want to survive longer in DeFi, this evolutionary approach may be more worth paying attention to than any hot narrative.
