B.Protocol Partners with Block Analitica: Launching a Transparent and Automated Risk Management Framework For Metamorpho Vaults
7 November 2023, co-written by Block Analitica and B.Protocol teams
Introduction
On October 24, 2023, Morpho announced MetaMorpho — an open-source (GPL) protocol that allows for the development of customized lending experiences on top of Morpho Blue. With MetaMorpho, users have the ability to delegate risk management to a MetaMorpho vault curated by risk experts. This approach allows Morpho to offer a diverse set of vaults with unique risk profiles, more transparency, and real yields derived from an immutable and efficient base layer.
Today we announce the strategic partnership between Block Analitica and B.Protocol to launch Flagship ETH and USDC MetaMorpho vaults.
The vaults will offer users a passive, transparent, and automated lending experience on top of Morpho Blue, by leveraging our teams’ risk expertise and risk tooling infrastructure.
Block Analitica and B.Protocol Partnership
Block Analitica is a dedicated risk management firm providing extensive, data-driven risk assessments, monitoring, and mitigation services tailored to the challenges of the DeFi ecosystem. For over 4 years, Block Analitica has had experience working with MakerDAO to assist in the management of a risk-mitigated portfolio of collateral backing Dai. We have also provided risk mitigation services and risk dashboards to other protocols in the DeFi Ecosystem, including (i) Aave, (ii) Compound, (iii) Spark, and (iv) Ajna. Block Analitica provides a critical and clear understanding of the fast moving market dynamics in the DeFi ecosystem. We believe that this approach is crucial to making the right, informed decisions when engaging with these new financial markets and economies. Our research, papers, models, and methodologies are securing over $9B in TVL and have been extensively tested throughout some of the worst crises and market events in crypto financial market history.
B.Protocol has been building open-source protocols and infrastructure for risk mitigation and assessment for the DeFi ecosystem since 2020. Through our research arm, RiskDAO, and its novel risk framework, we have supported over a dozen DeFi protocols with risk analysis, research, audits, and monitoring. Our Risk Oracle and SmartLTV formula automate the process of setting risk parameters for lending platforms in a transparent way, building the next generation of DeFi risk management infrastructure.
The unique architecture of Morpho Blue enables our two teams to join forces as risk curators on MetaMorpho. The main objective of the partnership between Block Analitica and B.Protocol is to combine our expertise, experience, and risk tooling infrastructure to introduce a new level of transparency and automation in DeFi risk management for Morpho end users.
MetaMorpho and Risk Curation
MetaMorpho serves as a risk curation layer on top of Morpho Blue the immutable and trustless infrastructure layer, enhancing the user experience across various aspects. The intention is for MetaMorpho vaults to be curated for different needs, including (i) a given risk appetite, (ii) user segment, (iii) return-to-risk targets, (iv) exposure to certain collateral types, and (v) mixed portfolio requirements.
A passive experience is pivotal for achieving widespread adoption, similar to what has contributed to the success of lending and liquid staking dapps. MetaMorpho vaults provide the same passive experience lenders are accustomed to but improve it with curated risk and better yields.
MetaMorpho empowers risk curators to create customized experiences, but it is important to recognize that managing risk is seldom a binary decision. The approach to risk management, estimation, measurement, and implementation often hinges on the individual risk appetite of end users. In existing lending dapps, there is no separation based on risk appetite within the applications themselves. All users and their varying risk profiles are aggregated, with the DAO’s overall risk appetite reflected in the parameters.
MetaMorpho introduces a new level of flexibility for risk curators. It allows us to articulate a broader range of risk perspectives than just an aggregation of those different appetites. With MetaMorpho, you can segregate them by establishing specific vaults tailored to unique use cases and desired return-to-risk profiles, all while leveraging the shared liquidity and borrowing activity of Morpho Blue. The only shared risk is that of the underlying layer, and users can choose their exposure within that.
The Flagship ETH and USDC MetaMorpho Vaults
The launch of the Flagship ETH and USDC MetaMorpho vaults marks a significant milestone as we will introduce two distinct options that will be rolled out consecutively. The first will be focused on generating yield on ETH and the latter on USDC.
Why ETH and USDC?
The choice to prioritize ETH and USDC for our initial vaults is grounded in the established and widely embraced use cases within decentralized lending today.
Which markets will we target?
Our flagship ETH and USDC vaults will concentrate on supplying to blue-chip LST and stablecoin collateral markets. The vaults will initially supply to stETH collateral markets and subsequently explore stablecoin and other LST collateral markets.
Who is it for?
These vaults will be tailored for lenders seeking a set-and-forget solution with primary exposure to blue-chip LST and stablecoin collateral markets.
Vault Objective
The goal of the flagship ETH and USDC vaults is to optimize interest earned from blue-chip LST and stablecoin collateral markets. This will be done by dynamically allocating funds between the different Morpho Blue markets based on the best risk-return ratios at any given time.
Roadmap
The Flagship ETH MetaMorpho vault will be available from day one, followed by the launch of the USDC MetaMorpho vault. This methodical sequence ensures our unwavering focus and a smooth gradual growth process, offering users a seamless and progressive experience with MetaMorpho.
We believe that a transparent and automated risk curation role should be prioritized. Our objective is to avoid manual “black-box” decision-making processes and instead focus on sharing our methodologies and risk models transparently. We will be releasing more updates on the ETH and USDC vaults, their strategies, and target markets as we get closer to launch in the coming weeks.
We have made an official proposal on the Morpho governance forum. If you are interested in using or learning more about our MetaMorpho services, please show your support and share your feedback.
We believe MetaMorpho and its underlying Morpho Blue infrastructure can improve decentralized lending by offering a diverse set of risk profiles and better service, both for new and existing users. We look forward to actively working and collaborating with stakeholders in the Morpho Ecosystem and remain dedicated to shaping its continued success.
