SUPERNEWS

Crypto

Gauntlet Ditches Aave for Morpho, Eyes DeFi Efficiency Boost

Gauntlet shifts from Aave to Morpho, aiming for enhanced control and a performance-based revenue model in DeFi lending.

By Max Weldon

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2/27, 10:32 EST
Bitcoin / U.S. dollar

Key Takeaway

  • Gauntlet switches from Aave to Morpho, aiming for better DeFi safety and efficiency with direct control over lending pools.
  • Morpho's model offers Gauntlet potential for higher earnings and flexibility compared to Aave's DAO-driven governance.
  • The move reflects strategic business considerations, highlighting differences in risk management approaches between the two platforms.

Gauntlet's Strategic Pivot: Embracing Morpho for a New Chapter in Crypto Lending

In a bold move that has sent ripples through the decentralized finance (DeFi) sector, Gauntlet, a prominent crypto risk management firm, has announced its departure from Aave, a leading blockchain lending platform, to forge a new alliance with Morpho, a competitor in the decentralized lending arena. This transition, occurring less than a week after Gauntlet's separation from Aave, marks a significant shift in strategy for the risk manager, with plans to leverage MorphoBlue, a service unveiled by Morpho in January, to develop its own lending products.

A Strategic Shift with Financial Nuances

Gauntlet's decision to transition its allegiance from Aave to Morpho is not merely a change of partners but a calculated strategic maneuver aimed at redefining its business model and financial prospects. The move is poised to offer Gauntlet a more lucrative and flexible earning potential compared to its previous arrangement with Aave. Notably, Gauntlet's compensation from Aave was previously adjusted from $2 million to $1.6 million, a move designed to align its earnings with those of Chaos Labs, another risk manager that joined Aave as its second risk steward in 2022. This realignment underscores the evolving financial dynamics and competitive landscape within the DeFi lending space.

The Competitive Edge: Morpho's Model Versus Aave's

The core of Gauntlet's strategic pivot lies in the distinct operational models of Morpho and Aave. Morpho's decentralized lending framework, especially through its innovative MetaMorpho feature, presents a more streamlined and efficient approach to risk management. This model grants Gauntlet enhanced control over critical aspects such as risk parameters, fees, and the management of MorphoBlue pools. Such autonomy represents a departure from the governance structure at Aave, where Gauntlet, as a risk steward, faced constraints in emergency controls and had to navigate the complexities of community votes for any parameter adjustments. This shift can be interpreted as a critique of Aave's governance model, signaling a preference for a more direct and efficient risk management process.

Financial Incentives and the Evolving Market Landscape

The strategic realignment to Morpho opens new financial avenues for Gauntlet, allowing it to directly earn fees from users of its pools. This model of profit generation, which scales with usage, offers a stark contrast to the flat rate compensation structure it experienced with Aave. Such a model was seen as limiting by Gauntlet, hindering its ability to align incentives and achieve growth over time. This transition highlights the changing dynamics within the decentralized lending market, with risk management firms increasingly seeking flexible, performance-based compensation structures that can adapt to the rapidly evolving DeFi ecosystem.

Navigating the Future

Gauntlet's move to Morpho is more than a change of partnership; it is a strategic realignment that reflects the broader shifts within the DeFi lending space. As the market continues to evolve, the decisions made by firms like Gauntlet will likely set new precedents for how risk management and lending practices are approached in the decentralized finance sector. With its new partnership, Gauntlet is not just seeking a new revenue model but is also positioning itself at the forefront of a changing landscape, ready to navigate the complexities and opportunities that lie ahead in the world of crypto lending.

Street Views

  • Nick Cannon, Vice President of Growth at Gauntlet (Neutral on Aave and Morpho):

    "On Aave, risk managers 'answer to the DAO.' 'Morpho,' on the other hand, 'makes Gauntlet and other risk curators closer to a first-class person.'"

Management Quotes

  • John Morrow, Co-founder of Gauntlet:

    "Found it difficult to navigate the inconsistent guidelines and unwritten objectives" of Aave's "largest stakeholders."

  • Omer Goldberg, CEO of Chaos Labs:

    "Aave's never thrilled that we're working with other borrow/lends, but it's not really been an issue... We have a platform so we're able to do these things, we're able to scale very quickly."