Morpho is a set of smart contracts that work with existing lending pools in the cryptocurrency world. It enhances these pools by adding a peer-to-peer (P2P) element, making it more efficient for users to lend and borrow money.
Description
Here's how it works:
- P2P APY: This is a special interest rate Morpho creates. It's between the lending and borrowing rates of the main liquidity pool it connects to. When users are matched directly with each other (peer-to-peer), they get this rate, which is usually more beneficial.
- Fallback to Main Pool: If there's no direct match in P2P, users automatically use the regular pool rates from platforms like AAVE or Compound. This ensures they always get an interest rate.
- Goal: Morpho's main aim is to make lending protocols more efficient in terms of capital. This means users can earn better returns on their loans or investments.
In summary, Morpho is like a bridge that connects users directly for better deals but also keeps the stability and security of traditional lending pools. It's a smart way to improve returns in the DeFi (decentralized finance) space.