DAPPCON 2024: Future of Decentralized Lending

Transcript

hello everyone how's Belin going excellent very nice thank you guys for having us absolutely I hope emo you're fine among two uh Merit diluters yes absolutely um I thought we could start off maybe you guys can give an overview as a user uh of course you guys are all three Landing protocols uh are you guys like targeting the same users and maybe you guys can like highlight what the main differences are of uh uh what your protocol uh might appeal to different users yeah sure I can start with this um so I would say actually we're a little bit unique uh in this in that we're not so much a specific lending protocol but uh as under spark it's more of a

liquidity provisioning uh for maker and uh D so in that sense uh we can use uh multiple markets um so we have I mean we have uh well we've even lended in the past to a V2 compound um and now more recently uh spark lend which is the av3 fork and uh now we've uh lended to Moro as well so that's a little bit of a difference between us I think um um yeah I mean pretty much av3 and the protocol has been like one of the uh it is currently the largest uh protocol by by tbll so users that use a usually they

look for um leveraging options to leverage their own collateral or to earn yield in a very simple uh fashion where users can just Supply liquidity whether it's usdc uh usdt die e um the lot the latest protocol iteration has a lot of features that allow even a long assets to be supplied safely and to be used as collateral in a in a safe way and uh yeah it's been a great journey five years of grinding and Innovation and we recently announced before so yeah like we keep moving

forward awesome I think morph is a bit uh different design by principle right um yes exactly so maybe it's wor mentioning that we have uh two protocols so initially we were actually built on top of a and compound so some kind of U optimization uh layer on top of compound and a providing like a better interest rates with like similar guarantees uh and and similar users uh with with Moro blue which is the latest protocol is very uh different approach where the risk management is externalized from the protocol so the Morpho blue protocol is is very primitive uh and so therefore and it's also permissionless so anyone can create the pools they want Etc so it addresses a user base that's much more

advanced in the sense that they have to know how to do risk management right and so in practice it means Risk Managers like you know directly using the protocol or Dows that are you know like spark like building like lending products on top right and so as you move into the abstraction layers on top then we target like similar users to a where you know obviously you have the lenders okay excess of capital want to generate interest and bars okay you know want to leverage on some collateral that you have uh I said m that we are probably able to like Target a broader set of of assets uh but you know we're obviously much smaller than than a V3 so we can you know we kind of like larger users tend to prefer like a a a V3 which has

like larger liquidity uh at the moment makes sense yeah I think the risk management is probably one of the big differentiators I think Paul you previously said that uh a is a financial product and broker while Moro is more of an IM mutal Financial infrastructure do you mean this because of the active risk management or is that like one of the components of it right so so like we have this mental model of like distinguishing protocols where you know platforms where the risk management is enshrined inside the platform in which case you know you have the Dow essentially taking risk decisions to connect liquidity and to set risk parameters uh you know quite actively so users don't have to and this is what makes you know uh a or sparland you know

very good product like users don't have to really think they deposit their money and they're you know fairly protected in a in a decentralized way by the way so like um and while the Morpho approach you know pushes this complexity back to the user which has some upsides and some downsides uh downside being okay they have to be active and they have to be knowledable uh and you know obviously the upside is that we can Target more use case it can become like immutable and permissionless and then on top you have you know those uh decentralized workers that can be rebuilt on top right so like reaggregating liquidity and and doing risk management Etc makes sense do you guys agree with the no I disagree with that view not I mean um I don't

think that a or the a act as a broker or or a decentralized fund uh I think his main uh Point regarding this topic was risk management and upgradability of the contracts so it is true that the the manages the upgradability of the contracts the upgradability of the contracts is not used to manage the funds of course although there is the potential for the Dow to do that but there is nobody in in a actually managing funds or moving funds around or deciding like if we go to the actual meaning of a broker in real life a broker is someone who does reinvest eventually capital or applies uh

investment strategies to Capital that's someone else supplies which is not what happens in a because everything is algorithmic and um um pre-programmed so the rules are on chain rules can change of course through through governance eventually um but the upgradability of the contracts is not uh really uh used for that purpose um one of the reason one of the things I want to clarify is that the current uh deployment of a biggest deployments of the a market a doesn't the protocol doesn't necessarily need to be deployed that way the way the currently is functioning is one of one of the ways that the Dow through uh

trial and error and through years of experience found that works at the moment H and scales but it's not necessarily the only way the the protocol is quite flexible so if an immutable instance of the market for certain needs is required to cover certain needs the main Market cannot cover it's perfectly possible to do that so uh I don't think that I access a fund or or a decentralized broker and I do believe that like at least the immutability uh will be targeted uh pretty soon because we all believe as well that the ultimate goal

of of a decentralized protocol should be immutable that's the ultimate me Target for a decentralized protocol and also with V4 there there will be a completely different approach to risk management which will further um reduce the need for the governance to intervene while keeping the same trust assumptions so yeah I'm I'm going to disagree with that so I think a and Spark as well are absolutely the Risk Managers of the funds that are deposited into the protocol so we are uh managing where the cash balance is going um it can be more indirect in the sense that you're onboarding a collateral and then users are taking leverage but

fundamentally the backing of something like a usdc or a usdt um or die is decided by which collaterals you're on boarding and in the um sort of extreme and it's really just the amount of Leverage you offer so as you go to infinite leverage you you approximate something that looks more like direct uh the protocol directly investing into something but it's really sort of more of a gray area of where you go so if you're at like 99% LTV you know you're effectively allocating funds into something and the backing of the deposit token is is the decision of the Dow has been been made to go into this asset that that is backing the uh the deposit token so in that sense I the users like

if a user doesn't like an asset that is list on they can easily withdraw and go somewhere else so for sure but you are opting into the uh a dow doing risk management would you agree with that yeah I do agree but I don't consider that a brokering whatever the I don't care about the terminology but yes you're doing risk management on behalf of the users okay and same with spark and maker yeah but that that's undeniable I don't think that that's uh accounts for brokerage that's my point okay whatever the term broker means I don't can discuss but we we can agree that you know even though you know the I for instance could become immutable if we remove the upgradable proxy and and the logic becomes immutable what's most important here is like the

parameterization of the risk and this can be managed by the to which we all agree and in Mor for it's all isolated The Lending positions right to right so so on Mor for like the the core Market has like a specific risk right and then it's an op in for you know people managing risk on top of Moro to decide to allocate a portion of uh their funds and their Capital you know into this specific Market exposing you know users to this specific spefic very primitive risk it's much much more primitive than the risk you get exposed to like on you know a compound or a nav it's like you know one collateral one rate and one Oracle for example and uh gives you much more flexibility and maybe we can talk about what we've been doing with spark

and you know how You' been exposing you know D to ssde in you know fairly senior Tren way uh yeah for sure I mean I think USD has been a big topic over the last few months may I get into that like why we chose Moro for this I think it highlights something limitations of a V3 and really just the compound design where everything is uh pulled together so originally when we were wanting to on board uh Athena as collateral because of the uh risk adjusted yield is just a very good opportunity right now due to the uh bull market kicking off so we were looking the default was of course to use sparland right we want to use that it's it's available it works really well high quality code like so we were going to use that by default there's uh kind of uh two main problems with the

limitations and one is that um the borrow rate if we were to onboard this collateral uh either you uh allow users to borrow at the um you know roughly the die savings rate a little bit above it's it's the same uh rate that we would offer to say uh users who are using eth right so eth is is like a um like you know borrowers are taking leverage on eth they get this you know 8 n% rate but if we were to offer the same rate to people who are taking a usde leverage it would be seeding way too much money uh to the it's like too good of an opportunity for the person who taking leverage so maker wants to capture most of this value because maker is the one like lping into this so like with u Moro you're able to the the the

markets are isolated so we can offer a Boral rate that and you know sometimes they're like 30% because of the high yields maker captures way more of this value and then it wouldn't crowd out the existing borrowers on spark lend who are enjoying you know this more 8 9% rate if they're borrowing with a high quality collateral such as e so this allows us to um you know capture more value into the protocol and then it it segments the the risk and so as maker it's a little bit different uh as like a regular uh LP where you kind of you have this opportunity cost uh with a with idle Capital so you have to like pick this Market um and be like okay I think there's going to be demand here so I'll put my usdc in here with maker maker can

just uh like mint diee into these markets and they're available on demand so there's no opport opportunity cost for holding die so it's really not a problem for us to support like every lending Market um because maker does not pay a cost of that and we're able to meet the users uh where they are so in this particular case uh it turned out that Moro blue was a was a much better uh Market to facilitate uh what we needed I pretty much agree in the sense that like uh for this particular use case where there is um uh unique uh individual single entity liquid provider like in this case maker you have the capability in Moro at the moment to segregate Capital better

than what you can do in abv3 is of course going to get addressed with abv4 we have a a wide series of features that will allow to do pretty much what was done with uh um with Moro blue using uh spark land vaults with v before um while maintaining uh like avoiding segregating liquidity I just want to say something regarding uh risk management it was mentioned before because it is true that the avow is doing risk management uh on behalf of users but and it's it is true that like Morpho Blue Pools have immutable risk

parameters which might be debatable if it's uh on the long term if it's a great choice or not but I want to highlight is that there is still risk management whether the parameters are immutable or not because what's going to happen for example we have been seeing in the with the gaunlet Vault on Reno e that if a market is deemed to risky uh by uh Vault managers which is the primary way liquidity supplied to Morpho blue what happens is that risk manager will probably pull the liquidity out of the pools that are riskier which means means that the borrowers that are borrowing uh from those markets will be

subjected to Higher and Higher and Higher rates until the outcome is either they rebalance to a less risky pool or they got liquidated so the outcome for the borrowers and the users is basically the same with the AG aggravating circumstance that you are actually going to get paid more in terms of uh sorry get charged more in terms of borrow rates so the the outcome I would say whether is the Dow managing the risk parameters or or risk providers built on top manag risk parameters is pretty much the same but there are trade-offs on both on both uh Solutions in my in my opinion on this poll I know Mor is like positioning itself as like a risk

management marketplace with the rents or liquidation that happened that just mentioned do you think like users acknowledge this differentiation between protocol and risk management platform right so obviously you know like it's very hard like to get the message out that you know Protocols are fairly different in the way they're structured uh but I think you know it's starting together like people understand that on Morpho blue the protocol is permissionless and I think in the day we deployed Mor BL like really few hours after we had the first scam markets created like you know someone was already you know like on unop you get like many scams you know every day like created and so obviously you know it's really a different Paradigm in the sense that we don't you know as a dow we don't guarantee anything to the user in terms of you know uh the risk they're taking

on the specific pair because a pair could be anything really and so lenders so some lenders you know they are found with that with that and they you know do their own risk management most user you know usually they want to delegate that responsibility right so they usually you know uh use the second layer of Morpho which is called metamorpho which is used for many different things including uh doing risk management reaggregating liquidity arbitraging rates etc etc and so uh as a lender you would go through this layer if you want to be passive right as a borrower you're still using the Primitive as of now right so like the the RO the RO primitive so you have to make your choice between you know the different set of assets and obviously

some assets are here and you you're taking you know significantly more risk using the E Easy E usdc pair than if you were like bwing usdc with BTC on av3 which you know that you know a does not easy EAS because it's more risky but you know some users do want to to use this right and and then they acknowledge the risk and and go for it still um so yeah and I think that's that's just like simply part of the design essentially makes sense yeah and then uh just coming back to USD I know a was also very critical of like the large exposure maker was uh kind of getting with the moro allocation I think it's that 350 million now die potentially going up to 600 million um I think like a is now also onboarding usde right there's a

snapshot passing uh do you see that like differently is like smaller amount or I just I think like most of the concerns at least on my part there were many voices uh when when this started the main concern at least on my part was neither that they were using Moro or main concern for me was that Athena is a quite new design it's untested it's been growing um massively uh on the initial bull phase on this Market it's in my opinion a protocol that works much better in a bull phase than in a prolonged uh bare phase and my main concern was if I I just didn't want

to see the the um space exposed to strong um systemic risk which in my opinion at the moment seems quite conservative so I don't particularly have uh strong um uh you know concerns around it and I think there was no um you know it was no it was pretty much public information was on the Forum that a was going on board usde at some point yeah and this is just Natural Evolution of of uh yeah of of this proposal that was created a few was created a few

months ago I think like already some time passed as well they kind of uh sustained already the first uh strong Market move movement downward with relatively relative ease so I do think that if we are careful enough like this thing can can scale further makes sense and the were the die parameters adjusted on AA I know there was a lot of discussion around that I think just the LTV but yeah makes sense yeah so for Athena I mean maybe from the outside it looks like we're just yoloing money into stuff but like that's not at all what happens like there is like deep risk analysis of the entire structure that was done uh for many weeks in advance and then there was a controlled ramp up

so like some people were throwing out the number you know 1 billion or whatever but as you said the exposure it's been two months and the exposure is 350 million which has been ratcheted up as we see things are proceeding uh well so it's and the other thing to take keep in mind is like these uh these are not this is not direct investment by maker these vaults are over collateralized and so when you do this risk analysis you know it's it sometimes it can be like intuitive but really you just kind of have to dig into the numbers figure out what are the likely scenarios where you know there could be insolvency and just uh set the parameters accordingly so uh yeah it's been fine so far um you know it is definitely a a product that's

going to thrive in a bull market but there's uh the analysis is done and like uh even even when there is a switch to the be these positions can just unwind at most you're getting dealing with slippage getting out of in and out of these uh per products but we're not talking about catastrophic losses in like an extreme scenario we're talking about a couple percentage points of potential losses um in in extreme scenarios and this is precisely why the Athena team uh has built their own internal Insurance buffer there are many many many layers of protection uh protecting die holders and this is the advantage of being in the DSR you uh get Athena's Insurance you get the over collateralized vaults you get the uh

maker uh Sur plus buffer which is 50 million die plus 160 million in protocol controlled value uh that is in this Unis swap pool that this is all protecting die holders such that they get uh the best risk adjusted yield in in defi at scale makes sense I guess Morpho is quite happy with these as well I think it's like 60% of borrowed uh assets come from this spark Vault right or Morpho blue at the moment right so happy like so one thing to clarify is like the the different than having the structure but also in the revenue model and how we think about you know Revenue generation So currently we you know we're not generating anyes on any of the the protocol that you know is created so we

just have like a fee switch that is turned off so yes we we're happy to have like you know activity and volume on Moro but we don't have you know any financial interest like directly related to this and it's yeah it's fair to say that you know so Mor is actually you know quite recent it's like four four four or five months old and that does represent like a large proportion today of like the activity there but all the other use case are growing quite rapidly as well um so yeah I have a question for him can I sure like how do you plan like at the moment the you know like returns in on on this Market are quite small related to the risk so these protocols usually manage relatively High Capital the return is not particularly high for

uh entities that created it or manage it so at the moment most of the return is captured by risk providers on Moro as far as I can tell so how do you see uh given the small margins uh how do you plan to make this competitive like given that you already have part of their returns going to risk providers yeah it's it's a good question so I guess um the main thing here the the Fe switch in Moro is tied to the license right so what happens so the current code of Morpho blue is a b a license but as soon as we turn on the fee switch it turns op Source right so it means that as an infrastructure like if we start generating some fees but we

don't create value then people will just Fork the protocol you know and just change and move to another instance just because they're not happy with it right and so how do we create value is the question well you know I think as many protocols in general we create value by bringing together lenders with bars uh in a common place right and so essentially you come to a V3 and not an a V3 like another instance of a fre for the state of the smart contract so liquidity is that's in there and it's the same thing for Mor blue like so on a you get the the state but also the risk management uh in in moral blue you get the liquidity and and and the risk

management so State and and those two are in in our opinion two different fee revenues right so Risk Managers get paid for their risk management and the infrastructure gets paid for the Network effects like liquidity that comes here and because you have like Network effects you're able to charge like a revenue and I agree it's fairly small right and it only works at scale and you know it's very similar to the unisoft approach where you know frankly if this you know unisoft starts activating fees and the license has turned op Source well people will start building forks and if you look at the gauntlet study that was done on the uh the unisoft V3 Fe switch if I'm not mistaken well they actually price this like the value of the network effect and uh so same thing for for for like Mor essentially like we

yeah I just see like with withinin returns having like the Risk Managers embedded into their flow of of of Revenue because like you mentioned uniswap like a Mor for already similar in the sense that we have liquidity providers which receive fees in the in case borrow interest and there is a small part that goes to the Dow for example in the a case and in that case there will be Risk Managers and users so there is another entity in the middle that was my question but so so I'm I'm not sure to get this so on on Moro you get the the Dow fee and and the risk manager fee which by the way is optional

if you know how to do risk management right uh I'm not sure to get how this is different from from a like a has to pay for like Dow operations as well as for Risk Managers and then you know maintenance for upgrades and everything which by the way we don't have yeah the difference is that we decide how much like the risk man set yes and so I would say so in the case of a the Dow decides in the case of Moro there is like an open market right so like Risk Managers can compete with one another uh it's not a you know one one say fit model where you essentially if there is like huge Network effect in the instance that that will be able to charge fees and you know Risk Managers are pressurized you know essentially in the sense that you know

there is an exclusive contract they need to get it and they're put into competition for this while on Moro Risk Managers are directly aligned with users and uh you know essentially they charge uh according to the volume that they get and according to what the free competition is doing so obviously that you know should compress fees down it's already the case like if you look at the fees on Moro they are really really tiny for for RIS managers uh so yeah cool Sam one thing I wanted to ask last year everyone was launching a stable coin and carry trading SII if the interest rate was low uh do you think we'll see this trend continuing and I know maker is also doing some changes with d some new Stables coming it's just a Rebrand of D

maybe you can give some insight into that you mean for like borrowing die the carry trade into like higher yielding opportunities uh yeah absolutely So like um I mean these people uh they post collat this is a great use case for like spark landland and maker cor vaults and like people can post collateral and if there's opportunities elsewhere in the market uh they can borrow die and then you know take that rate Arbitrage so um yeah that's like been been a big use case of uh maker for a while so yeah I think it definitely will continue yeah I think one of the stable coins of coins launched last year was go right uh which struggled a bit at the beginning now is back at Peg I think the avidal started investing a lot heavily into to go um curious to see you know it's been a lot

of effort and investment going into it a lot of emissions uh what's like kind of the vision I saw go is also like a big uh component of iv4 it's like much more integrated uh can you give us like an overview like the vision of go in the future and how it's being built up I me it's my personal Vision not necessarily the vision of of the hold out personally I think that uh go can be a pretty strong uh component of the da in the in years to come some of the features of before are like to uh more tightly integrate go with the with with the protocol because I personally believe that by doing so we can provide benefit to

the users so for example receiving interest in go uh when go is uh strongly at Peg like it is right now uh can for example the the Dow can benefit from uh having go injected into the market in different ways uh so by doing that you can provide benefits to to the users that are actually uh supplying stable coins by for example charging less from a from a revenue uh standpoint so uh there are some benefits uh regarding some stuff that we can do that we could not beego like for example a soft liquidations which is a mechanism

that was introduced by uh CRV USD something that uh some people think that should be built on top which is possible of course I actually already has um through integrators like defy saer uh there are some automatic repayment uh features or automatic uh um collateral exchange features whenever the the the market is going down for example and they work great uh but we did some analysis on CRV USD and the fact that is integrated a lower level uh into the protocol makes it uh possible sometimes users even profit from the the the application of of soft uh liquidation to

the protocol so this is something that we don't not without a stable coin you can not you could you couldn't do it basically because stable coin is generated on the fly whenever such a transaction happens so there are quite a few benefit of having a stable coin for a protocol like a and I do personally think that it should be strong driver moving moving forward cool and Paul will we see a more full stable coin coming soon or no it's not it's not at least you know it's not not something we we're considering right now um I think to be frank like the way we're approaching like defi lending is you know I think everybody guess is like fairly different approaches and I think

the a approach is actually very close to what you in terms of like engineering and and operations behind the scenes is very similar to what you need in order to get you know the decentralized management of a stable coin right so it's very natural for me that a came to like do a you know the GH Co but that's like again we position more ourselves like you know like the base primitive lending Market market so you know would make much less sense in our position even though you know like again it's quite a lucrative activity when five years of development and they will come I want to comment on the stable coin thing a little bit um so like I think there's this like magical like thinking that like stable coins are these magical things that just can yield all kinds of

uh return and that's really not the case like really a stable coin is fundamentally a tokenized deposit into some lending apparatus and so uh whoever's dealing with that you know that's that's details but that's it's like a tokenized uh bank deposit but on change that's essentially what a stable coin is and the vast majority of stable coins are actually not uh Revenue generating they actually cost more than they uh than they uh end up providing um because you have all this like cost with the bootstrapping demand um you know keeping it at Peg that costs money and so most of the time these uh these Protocols are using uh incentives to uh maintain maintain the Peg and boost the supply at the same time this takes the

form of uh token rewards on like a curve or wherever else right where they uh can boost the demand that way um and like I you know this is even true for Dy so Dy actually emerged in this kind of nice period where it got this boot bootstrapped uh Demand right off right off the bat and it's sort of been um you know coasting a little bit off of that but uh since then the competition is just extremely Fierce so tether is uh completely dominating this space and they cons continue to consolidate their lead um and so even like uh Circle and die as the uh next largest are struggling to uh maintain this uh thing the the natural tendency is things to just centralize and consolidate so the

uh the value prop that the stable coins need to offer is offering more and more yield to the users this is the uh this is the only way you can really uh fight demand in sort of a you know sustained way and um finding more Integrations and stuff like that so it's really like it's a it's an uphill battle and like even if you're well established like it's uh it's really tough um yeah so it's it's an interesting uh um part of the space yeah cool I don't think it's uh I agree with him on the fact that like it's really hard to grow and maintain a stable coin I I think that's pretty much true for everything so like even a at the beginning to to get the the the

position where a in at the moment like there was a lot of work around doing that incentives of which D also benefited at the beginning like I in my opinion d as a decentralized stable coin has huge big mover Advantage because like they managed to benefit from incentives from basically all the protocols that launched during uh defi summer in 2021 and uh and that's that's big in the sense that that's a great driver and replicating that is really hard but I do think that that's the reality with almost everything so like at the beginning you need to invest to actually

be able to to to grow so I do agree that it's more costly actually but it's I see it more as an future investment rather than expenses makes sense and one question I wanted to ask before we finish is something I'm not quite sure of Sam you guys forked av3 when it was MIT but you guys have an arrangement with Avid where you guys pay them something but the arrangement changed cuz you guys were not happy with the arrange like there's something going on and like can you guys give some clarity on what the arrangement is or what's going on for sure I mean uh so that original deal was crafted in February and at that time we were kind of just moving fast and getting stuff done so we put some stuff down in the arrangement

that we we thought kind of made sense at the time but you know things move fast in Defi and so uh the arrangement was adjusted uh after the fact um that it wasn't it wasn't yielding money right away and you know we felt that wasn't uh quite fair so we adjusted the arrangement to be actually paying uh a DA for the two-year period that it runs and right now um it's on track roughly to be covering about 15% of the costs to build avv V3 which was I believe 10 million um that was paid for that so yeah about 1.5 million um and you know it's open source code I'm a firm believer that people should be free we release all our code uh open source anybody can use it compete with us whatever so this was a added bonus on top of it um we felt that was U was

warranted any thoughts well I mean on my side on my side he knows that I was one of the main critics of the of the whole thing um I personally like at the moment I'm fine with it like spark is also given a different path compared to a few months ago where they are really strongly focusing on growing D mostly so at the moment I don't see right direct competition between a and and even allocate are yeah yeah so at the beginning I was a bit annoyed of the whole thing personally again that's fully personal opinion I didn't like the way the thing was handled on the governance side in my

opinion was not clear what what what was going to happen and we have been working with these guys for a long time like since since like 2017 2018 like we we were building Defi and D was not available yet that's when we started working so that annoyed me but like you know things pass water goes like under the bridge and things evolve so yeah so so what license will a be under well five years BSL that's the meing five years just kidding I don't know like the governance will decide cool I think we have some time for audience questions or or we have more time for

questions I have one more question a one audience question is okay not too many not too many there's one there hi uh so in terms of uh different positions related to imitability of the configuration like it exists in moror and the some part of management which could happen in different protocols I'm wondering how you're going to solve the case when for example users could be

locked if the market conditions would be changed pretty fast because basically it's all the game if you want to explain all possible cases to users your explanation could be a little bit longer than terms of use of apple and I want to ask who read all terms of use in Apple device or iPhone I think nobody here because it's like a 50 page of low legal text and if you start to talking more about things that in case if the risk rator set up the interest rate not correctly and the market change your funds could be locked for a few years years so and in this

case people could come and ask I do not underestimate that it's possible so how to really break this user perception that people could be able to lose their money for a long period in terms of Deadlock or do not ask them to read a 40 page terms of things like it happens in web to right so I I just want to make sure I get the question right so you're asking in the event where you break uh the RIS profile into immutable micro Primitives in the event of you know one primitive going wrong and you know like lenders decide to withdraw and and so what was the and so

then the question is what happens with this given market like or just just want to make sure it's not a market it's like uh so basically when people come to defy or blockchain they should be at least tax savy because it's uh really not the best experience like you register by mail which was confusing when it started for a many years people couldn't understand how to do that in defi you should have Ledger maybe save for security then you should understand how it works and then there are use cases which you do not expect yeah so if you want to build a protocol which could be understandable for average user you should really

explain all possible risk for example if this price will go down or up and people are not willing to take their money back on close their leverage position we can do nothing regarding to imitability of our settings so you should be ready to forget for your funds about for 50 years and when you will be an old fellow you can get an access luckily to them yeah so it's a it's it's a case which possible I do not tell us that it could be here but me as a user if I'm not a very deep in landing I should have a clear picture how it work before making a decision to provide my money to some particular defi primitive and because

it's immutable it's create like a dead log for a long period of time think so how you are going to explain Point users or this immutable pools for only Tak save your profits like maybe 10 in this hle yeah so I so first like I completely agree that at the Primitive level is your lending you know you have to fully understand what's the full risk of like a given you know primitive right and uh by the way moros front end like Morpho blu's front end uh that we host as like the morha association does not give you access to the lending Market directly for this specific reasons right because you could have like one market with you know one specific issue and it's it's fairly complex especially on the lender

size Less on Less on the bar side but the lender side is very hard right and so you have Risk Managers that are doing the job of post aggregating liquidity in case of like you know if there is one market specifically that gets into a deadlock as you described then you have like you know 10 different other markets that you know you get liquidity from and then the rate of the other Market will Spike eventually you know triggering the leverage you know I don't know if that's going to take like 40 years given like I don't know if you studied like the specific interest rate model curve that we have so it should be much like you know shorter than that but uh but yeah and and the other thing is that the Primitive in itself does not specify that oracles for example are immutable oracles can change you know

for example like chain link in itself you know changes you the way they they price things not always but you know it depends and you could also have like upgradable instance of the Oracle specifically uh in that case um I don't know if that can kind of answers the question uh can I add something yeah of course go no I just want to say that I mean it's a hard problem this we have seen it happen it happened on H happened on like in some at some point there were there was huge market demand and like someone borrowed up the whole liquidity or there was um I don't know some for example I remember the CRV thing which at some point people was people were thinking something would happen so they start ping in reality nothing happened

in general in general I think that we should approach decentralized uh Finance I mean it's like um uh self- custody right self- custody if you mess up and you sign a transaction or a message that can drain your whole wallet you have no nobody to complain to and this is the pros and the cons of of permissionless uh networks and permissionless finance this can happen in traditional Finance as well you can buy a bond and the bank disappears tomorrow and your money is gone and maybe you get something from the bankruptcy uh procedures in 20 years so it's exactly the same thing so I do think that we should do better like trying to improve like uh in terms of uh

for people that are not tech savvy to understand like what are the potential risks it's not easy I would say to do so because like there is a whole bunch of technology behind it and I think like things will will improve also over time but I don't think it's a problem that we are going to 100% solve because it's a financial problem that happens also in traditional Finance it's not specifically uh uh specific of decentralized Finance yeah awesome I think that's us yeah thank you thanks everyone