Morpho Midnight is live on DeFi Saver

Today, we’re super excited to welcome the latest iteration of Morpho to the DFS lineup (or, as we like to think of it, an entirely new product in its own right). Morpho Midnight on Base is now supported on DeFi Saver.

We first started working with Morpho back in early 2023, when we integrated Morpho-Aave v2. At the time, Morpho pioneered a peer-to-peer layer on top of protocols like Aave and Compound, which in turn offered users identical collateral and liquidation factors as the underlying protocol, but with improved APYs for both lenders and borrowers. 

Fast forward to today, and Morpho has evolved into an open, permissionless lending protocol focused on market creation and efficient interest rates.

Now, the launch of Morpho Midnight essentially aims to bring immutable, fixed-rate lending to DeFi users. But before we dive into the DeFi Saver tools now available for Midnight users, let’s first cover the basics.

About Morpho Midnight

Morpho Midnight is not a replacement or a V2 of Morpho Blue.

Rather, it's an addition to the existing infrastructure that introduces another approach to lending and borrowing.

With fixed-rate lending, borrowers and lenders remain completely aware of the cost of borrowing and expected returns.

On many of the most prominent lending protocols, interest rates are driven by utilisation. When demand for borrowing spikes, rates rise accordingly to help bring utilisation back down. The problem is that these spikes can be difficult to predict, leaving both borrowers and lenders with an element of uncertainty and, ultimately, speculation.

Sure, locking in fixed returns isn't a completely new concept in DeFi, especially having written about projects such as Pendle in one of our previous blog posts.

However, Midnight is probably one of the most ambitious endeavours to bring fixed-rate/fixed-term lending to a wider audience.

Lenders know the expected return upfront, and borrowers know the cost of borrowing for the entire duration of the position. Once a position is opened, the rate remains fixed until the agreed maturity date.

Moreover, Morpho Midnight utilises an order-book-based approach. That means it directly matches borrowers and lenders based on specific terms, such as interest rate, asset type, and maturity.

Liquidations come in two forms. Health-based liquidations only sell the amount of collateral needed to bring a position back to a healthy level. Instead of automatically liquidating the entire position, only the necessary portion of collateral is sold.

These liquidations can occur both before and after maturity, with different mechanics applying once a position reaches its maturity date.

After maturity, every position enters a one-hour post-maturity liquidation window, regardless of its health factor. During this period, liquidation incentives progressively increase, so that liquidators can fully liquidate the position if necessary. The purpose of this mechanism is to ensure that lenders can recover their capital after maturity.

For borrowers, the mechanism creates an incentive to act before maturity by either repaying or rolling over their position. If they want to continue borrowing, rolling the position over before maturity allows them to avoid the post-maturity liquidation process and move into a new term.

For greater insight into how Morpho Midnight functions and what sets it apart from other traditional lending protocols, make sure to check out the latest Pick DeFi walkthrough.

Morpho Midnight on DeFi Saver

When designing the Morpho Midnight UI, our goal was to make it easy to see what each market has to offer, so that you can compare your options.

To get started, select Morpho Midnight from the left sidebar on Base and click Create. Filter by your preferred collateral and debt tokens to browse available markets, compare maturity dates and fixed-rate terms. 

Currently, the interface brings together both Morpho and Tenor markets. Once you find a market you fancy, DeFi Saver lets you enter a leveraged position in one tx. You just have to adjust your desired leverage, choose your preferred borrow rate, and fine-tune slippage settings before executing the position. And voila, you're set.

Managing your position is just as straightforward. Boost & Repay (with collateral/via orderbook) are readily available from day one for those looking to increase leverage or unwind their positions in a single tx.

It is worth noting that, at least for now, all of these possibilities demand the use of a smart wallet. EOA support is in the works, and quite soon, you can look forward to our DFS Automation kit expanding to cover Morpho Midnight as well. 

A lot is in store for Midnight, but in the meantime, please do not hesitate to share your feedback on the UI with us. And as always, if you have trouble managing or come across any hurdles, our support team is at your service

Until the next post, stay safe out there!

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