Gauntlet, a decentralized finance (DeFi) risk management firm, has joined forces with Morpho, a DeFi lending protocol, shortly after ending its partnership with Aave. The collaboration, announced on February 27th, involves Gauntlet creating its own lending products on MorphoBlue, a new protocol that enables firms to establish their own lending and borrowing pools called “vaults.” Typically, lending protocols hire firms like Gauntlet to provide guidance and manage risks. However, MorphoBlue allows risk managers to create and oversee their own lending protocols. This differs from Aave, where lending pools are accountable to the AaveDAO, a decentralized autonomous organization responsible for governing the protocol.
Gauntlet’s decision to team up with Morpho resolves the uncertainty surrounding its future after parting ways with Aave. The split, which occurred just two months after Gauntlet signed a $1.6 million contract with AaveDAO, was explained by Gauntlet co-founder and operating chief John Morrow in a post on the AaveDAO forum on February 21st. Morrow cited challenges in navigating the inconsistent guidelines and unwritten objectives of the major stakeholders as the reason for the abrupt separation.
Morpho co-founder Paul Frambot criticized Aave in a post on February 22nd, accusing the protocol of attempting to hinder Morpho’s growth by introducing a reward program called Merit. Frambot also outlined how Morpho aims to compete with Aave and Compound, the two dominant firms in the DeFi lending space. In his opinion, Morpho’s Blue protocol is a direct competitor to AaveV3 and CompoundV3, offering more transparent incentives and risk management for users.
According to DefiLlama data, Aave currently leads the DeFi lending market with over $9.3 billion in total value locked (TVL), while Morpho holds $2.7 billion and $978 million. In a subsequent post on February 22nd, Frambot described Gauntlet’s split from Aave as inevitable due to misaligned incentives, scalability issues with cash flow, and a combination of politics and complex mathematics.
In other news, MakerDAO has unveiled its plan to revive the “DeFi summer,” as shared by Rune Christensen.