Compound <> Morpho <> Polygon Collaboration

Proposals
14

Hey all,

Thanks, @mexilc, @compensator, and cmrn, for this valuable input in this exciting proposal. 0xloth chiming from Morpho’s Growth team. It’s very exciting to see initiatives such as this one, where the Morpho stack is used to serve Compound’s existing use cases in a novel way, propelled by POL and COMP incentives.

From a pure growth perspective, it seems like Polygon’s $1bn liquidity (including $600m in money markets) represents quite an opportunity for Compound:

  1. Some napkin maths on revenue potential: 50%(Fee sharing) * $600m (lending TAM on Polygon) * 5% APY (Average lending APY) * 22% (Compound v3 average fees) = $2.75m. These are recurring revenues, not just one-off fees that can be extrapolated to the near future (2-3 years at the very least)
  2. In this scenario, Polygon effectively subsidizes 50% of the cost of this liquidity migration. This provides a rather efficient and socialized way for Compound to attract capital
  3. Should this migration happen, Compound would 10x its lending market share on Polygon

On the incentive front, as OneTrueKirk outlined, the Morpho DAO only provides incentives to full-support deployments that are Morpho-branded instances. In this situation, Compound would leverage Morpho code seamlessly from its existing UI at no cost while retaining full ownership of the fees and risks. This appears like an aligned situation.

When “feature parity” (that is, the same lending experience to Compound powered by Morpho) is achieved, the Morpho customizable stack could also enable Compound DAO to augment its current offering. Some of the top-of-mind ideas are new asset/Polygon-specific collaterals and higher LLTVs to improve borrowers’ capital efficiency. All this can happen without adding any risk to the Compound’s existing experience due to Morpho’s isolated lending pool nature.

I’m excited to see how the above could drive new growth to the Compound ecosystem on Polygon.

1 Like