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Decentralized finance (DeFi) risk management firm Gauntlet announced a collaboration with DeFi lending protocol Morpho just days after its sudden split with Aave. Gauntlet is creating its own lending products on a new protocol called MorphoBlue, which allows firms to establish their own lending and borrowing pools, referred to as vaults, as announced on February 27th.
MorphoBlue Team Takes a Significant Step
Lending protocols generally hire firms like Gauntlet for consultancy and risk management. However, MorphoBlue will take a significant step by enabling risk managers to create and manage their own lending protocols. Morpho’s borrowing and lending style is different from Aave’s, where lending pools have to answer to AaveDAO, a decentralized autonomous organization responsible for the protocol’s governance.
John Morrow, co-founder and chief operating officer of Gauntlet, cited challenges navigating inconsistent directives and unwritten goals among major stakeholders as the reason for ending his firm’s relationship with Aave in a AaveDAO forum post dated February 21st.
This unexpected split occurred just two months after Gauntlet signed a one-year, $1.6 million contract with AaveDAO. The partnership with Morpho cleared up much of the confusion among DeFi market experts, and many were curious about Gauntlet’s next move after parting ways with Aave.
Recent Developments in the DeFi Space
Morpho’s co-founder Paul Frambot targeted Aave in a February 22nd post, claiming that the protocol tried to hinder Morpho’s growth by offering a reward program called Merit. Frambot also outlined how Morpho aims to compete with Aave and Compound, which have historically dominated the DeFi lending space. According to Frambot, Morpho’s Blue protocol will directly compete with AaveV3 and CompoundV3 by offering users more transparent incentives and risk management.
According to data from blockchain data analytics platform DefiLlama, Aave continues to lead the DeFi lending sector with over $9.3 billion in total value locked (TVL), compared to $2.7 billion and $978 million for Morpho. In a February 22nd post, Frambot deemed Gauntlet’s departure from Aave inevitable, pointing to misaligned incentives, challenges with scalability of cash flow, and the combination of complex mathematics with policy.
