Recently, I've been browsing Morpho's blog and governance forum while reading its latest Morpho Effect monthly report. My mindset is actually a bit subtle: the project's TVL, partners, and news highlights have all reached a ceiling. From the Ethereum Foundation holding 2400 ETH and 6 million dollars in stablecoins to front-end integrations with Coinbase, Crypto.com, and Hyperliquid EVM, and total deposits crossing 10 billion, pushing all the way to over 12 billion dollars, it would seem that they could easily follow the traditional route of 'pump—dividends—storytelling.' However, the team is choosing to invest more effort into governance structures, reward systems, and developer tools at this point in time.
As someone who has been immersed in the blockchain space for several years, the most striking point for me this time is that Morpho publicly announced it will only have one asset—this single governance token, MORPHO. The official statement in (Aligning Around MORPHO) is very straightforward: no dual value of equity and token, no plethora of 'ecosystem tokens'; the entire network's value is aligned solely around MORPHO itself. To achieve this, they transferred the originally equity-structured shares of Morpho Labs to a French non-profit association, Morpho Association, which legally cannot have shareholders, cannot distribute dividends, and cannot be sold; it can only invest all resources into 'growing the Morpho network'. In other words, those entities engaged in research, coding, or BD will theoretically only be able to realize any value earned through the MORPHO token in the future, rather than hiding behind an invisible cap table. This, for us ordinary token holders, actually lays out the interests clearly.
What's more ruthless is that they directly laid out the often unspoken but deeply concerning question of whether to distribute dividends in this article. Morpho's stance is: at this stage, the protocol is more like a high-growth startup rather than a mature, cash flow-eating company; any revenue generated at the protocol level should be reinvested into growth as much as possible, rather than creating a superficially attractive but ultimately limited 'dividend narrative' in the long run. They even cited traditional tech stocks as examples—companies like Apple, Meta, and Google only started distributing dividends after over a decade—clearly implying that if you truly believe an open lending infrastructure can partially replace traditional finance, then what matters now is to expand the moat, rather than hurriedly breaking every brick to distribute to everyone. As a user who is often tempted by 'high APY', I admit this perspective may not sound appealing, but from the perspective of the funding curve, it seems more like a choice made by a project that genuinely wants to last a long time.
After discussing the broad framework of 'where the money comes from and who it goes to', looking at Morpho's recent operations in terms of rewards helps understand why it always emphasizes 'sustainability'. Starting this year, the DAO shifted the reward logic to a framework called Optimistic Rewards: the overarching distribution model is set in governance first, and when adjusting specific interest rates, the association will issue a notice in advance; if the community has no objections, it will automatically take effect a few days later. For instance, during the adjustment in March this year, the DAO simultaneously lowered most rewards on Ethereum and Base while also differentiating based on actual usage—stablecoin reductions were smaller, ETH was paused, and long-tail assets with lower productivity were further cut, even reducing the rewards for BTC-like assets on Base again. The reasoning was clearly stated: the borrowing demand on Stable and Coinbase was too strong, and the 'business interest' earned from lending USDC was already considerable, so there was no need to continue using high subsidies to prop up all assets like before.
By July, they released MIP 111, migrating the entire rewards distribution stack to Merkl, which is actually a very technical but crucial upgrade for the user experience. Previously, Morpho calculated and distributed rewards themselves, which was cumbersome and slow due to cross-chain and updates; now it's handled by Merkl, which specializes in incentive distribution. There are several reasons: first, Merkl is already deployed on most major public chains, aligning with Morpho's multi-chain expansion pace; second, users can claim rewards every 8 hours instead of once a week, significantly improving capital efficiency; third, many Morpho ecosystem partners are already accustomed to using Merkl for activities, unifying to a standard solution that saves a lot of team effort for truly important lending infrastructure. For someone like me who is used to long-term incentives, this means that in the future, to check rewards, I not only need to keep an eye on Morpho's frontend but also learn to 'understand parameters' on Merkl's interface and governance threads, truly grasping the trade-offs of DAO in resource allocation.
These adjustments in governance and incentives are actually all aimed at paving the way for the 'infrastructure mode'. The article (Morpho Everywhere: Infrastructure Mode) from January this year essentially announced that Morpho has transitioned from a single-chain DeFi protocol to a complete lending stack that can be reused across multiple chains. The first batch officially deployed the Morpho Stack on a series of public chains including Polygon POS, Arbitrum, Optimism, Scroll, Ink, World Chain, Fraxtal, etc., and they very prudently emphasized: this batch of deployments is 'infrastructure-first', and will not initially connect directly to the main interface of the Morpho App, nor will it default to enable MORPHO rewards; whether to upgrade to 'core deployment' depends on whether there are actual curators and applications on these chains willing to take over, which the community will then decide through governance.
From a technical structure perspective, this Stack is not a simple 'contract duplication'. Each multi-chain deployment packages a whole set of components: the underlying Morpho core contracts, Vaults, oracles, reward distributors, adaptive interest rate models, public Allocators, and two modules I personally really like—Pre-liquidations and Bundler3. The former is used to smooth out liquidation risks in advance, preventing a one-size-fits-all approach to liquidation; the latter is what I find most apparent in my actual experience as the 'frontend magic': it allows a series of complex actions, such as authorizing, wrapping assets, depositing, and borrowing, to be bundled by developers in a single call, so users only see a one-click operation on the interface without needing to be forced to click 'Confirm' multiple times.
If you shift your focus away from the protocol itself, you'll find that Morpho spends a lot of effort teaching everyone 'how to correctly understand lending'. Paul, in (The Price of Trust), used an almost anthropological perspective to narrate debt from the clay tablet accounting of five thousand years ago to today's positions on blockchain, with the core point being simply this: the essence of lending has never been about 'how fancy the liquidation algorithm is', but rather 'whether we can price trust assumptions in a transparent manner'. Within this framework, Morpho Blue provides an extremely simple and verifiable accounting logic; Vault, Public Allocator, pre-liquidation, Bundler, and other components are designed to package, expose, and distribute around different types of trust. If you trust the institution's credit, you will tend to use Vaults backed by compliance layers and RWA; if you trust a group of DeFi OGs' risk control, you will look at their managed multi-market portfolios; if you trust purely collateral liquidation, then just go directly to the original market. Every choice you make on the interface essentially answers the question: what kind of 'trust assumption' am I willing to write into my position?
From Azur's own perspective, the most striking aspect of Morpho's 'experience upgrade' is not a single product, but the feeling of 'encountering it everywhere'. Using a wallet app on a certain chain to open Earn, what’s behind it might be Morpho Lite or OnchainKit Earn connecting to a certain Vault; opening the 'on-chain yield' page of a CeFi platform, checking the documentation to find it connects to the Morpho Stack through API; doing one-click collateral borrowing of Stablecoin on a multi-chain DeFi aggregator, and when signing, only a contract call containing multiple steps pops up, most likely packaged by some Bundler. This experience of 'protocol hiding under someone else's UI' can be a bit disorienting at first—we're used to checking a project’s official website, looking at TVL rankings, and checking pool lists—but when you realize that the dozens of frontends you’re using actually share the same security framework, the same audited contracts, and the same governance forum, you begin to face the 'abstracted infrastructure value' seriously.
Of course, to articulate this long-term narrative without it feeling hollow, the key is to see whether the DAO's day-to-day operations can 'stand the test of flipping'. I have developed a habit: every month I visit the Morpho governance forum, first glance at the latest Governance Call announcements, then check if there are any new MIPs or discussions under the rewards, risks, and cross-chain sections. In recent months, I've seen proposals about USDC reward adjustments on Base, Arbitrum incentives, LayerZero OFT cross-chain bridging of MORPHO, and long posts specifically discussing 'governance and token economics sustainability'. For an ordinary user like me, it’s not necessary to read every detail, but at least I can feel one fact: the 'important parameters' of this protocol are no longer quietly altered by some multi-signature wallet on weekends, but need to be written into a public framework and go through processes in the forum. This level of transparency, combined with the previously mentioned 'single asset + non-profit association' structure, constitutes the most crucial advantage of Morpho now—regardless of whether you stand as a user, developer, or potential token holder, you know exactly who this system is serving.
Returning to practical operations, if you were standing next to Azur now and asked me, 'What can I do in this round of Morpho's latest evolution?' I would probably give you three steps of advice. The first step is to pull yourself out of the mindset of purely being a 'yield farming user' and start acting as a 'quasi-shareholder': spend some time reading articles like (Aligning Around MORPHO) and (The Price of Trust) to understand who this protocol aims to earn money from and what market it is targeting; this will directly affect your holding logic for MORPHO. The second step is to learn how to use the governance forum and Merkl as a 'navigation tool': every time you see unusually high APY for a market or Vault, don't get excited first; go check the forum to see if there are new incentive activities or parameter adjustments, and then confirm on the Merkl page how long this reward lasts, how big the budget is, and whether it matches the actual borrowing demand; don't turn yourself into a 'short-term consumable' that purely burns through the budget. The third step, if you are working on products or strategies, is to thoroughly research the Infra model of Morpho Stack and the Bundler tool, and think carefully about whether to migrate part of your product logic to this lending stack that has undergone multiple audits and is now deployed across multiple chains—not only is it a matter of 'saving development costs', but it also provides users with a more explainable and sustainable underlying structure.
For me now, Morpho is no longer just a lending protocol where you can 'mine a wave of incentives'; it feels more like a serious infrastructure company building a financial operating system, except this company happens to be decentralized and tokenized. You might enter and exit based on its impressive partners and attractive data in the short term, but if you're willing to upgrade from user to participant, you'll discover that the governance structure, reward system, and toolchain built around the single MORPHO token are slowly transforming 'lending' from a series of individual positions into a long-term business that can genuinely operate on-chain for ten or twenty years.
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