ON–221: Lending Protocols 🏦

Coverage on Spark, Morpho, Kamino & Flux.

Apr 5, 2024

ON–221: Lending Protocols 🏦

Lending Protocols 🏦

① Spark 🔥

📈 The Spark Morpho vault’s entire 100M DAI deposit borrowed within first 6 hours, and generates over 60M in annualized revenue

  • The Spark DAI vault allocates funds from MakerDAO into Morpho Blue pools collateralized with Ethena’s USDe and sUSDe tokens. Based on strong demand for perp funding yield and Ethena points, the vault saw almost the entire 100M DAI deposit borrowed within 6 hours of launch. The below chart shows one of 8 isolated lending pools used by the vault, which saw ~30M DAI deposits borrowed immediately.
Source: morpho.blockanalitica.com
  • Morpho market size and TVL have nearly doubled, reaching $569M and $353M respectively, driven by Spark’s significant DAI deposits and corresponding USDe and sUSDe collateral posted by borrowers. With Maker expected to increase DAI capacity in the Spark vault soon, these metrics should continue to show strong growth.
Source: Dune Analytics - @morpho
  • The Spark DAI vault is currently generating over $60M in annualized revenue for the Maker protocol on the existing 100M DAI deposit. Maker is proposing to gradually increase DAI deposits up to a maximum amount of 600M DAI, assuming risk and return conditions remain favorable. If average borrow rates remain at current levels (60-70% APY), this could result in an additional ~330M DAI in annualized revenue, and more than double the protocol’s net profit.
Source: morpho.blockanalitica.com
  • 💦🔬 Tx-Level Alpha: Like other Metamorpho vaults, distribution of funds between various underlying Morpho Blue pools is managed by an Allocator multisig. This allocator role has strictly limited permissions, giving the ability to move deposited funds between whitelisted pools up to predefined supply caps; setting whitelisted pools and caps is managed by the Owner role, which for the Spark vault is ultimately controlled by MakerDAO governance through the Spark subDAO proxy. Additional funds deployments to the Spark vault involve two multisig transactions, an initial transaction to request a deposit of funds from Maker’s direct deposit module (constrained by Maker’s internal debt ceiling parameters), and a second transaction to allocate funds across various pools. Monitoring the allocator multisig may be helpful for borrowers looking to get in early when additional funds are deployed.

② Morpho 🦋

📈 Morpho exceeds $2B total deposits

  • In January, Morpho launched a new lending protocol named Blue. It is a simple lending primitive layer that allows the creation of immutable and efficient lending markets in a permissionless way. Within just 24 hours of its launch, Morpho Blue nearly doubled its total deposits, reaching close to $600M, fueled by strategic partnerships with MakerDAO and Ethena. Through its D3M, Spark deployed 100M DAI to USDe/DAI markets quickly attracting many borrowers.
Source: Dune Analytics - @morpho
  • Morpho is approaching 1B$ in total borrow value with around 220M$ coming from its new lending product, 450M$ coming from its Aave-V3 Optimizer and 300M$ from the Aave-V2 Optimizer. Notably, Morpho surpassed Compound's total borrow in February.
Source: Dune Analytics - @morpho
  • After Steakhouse Finance, Re7 Labs and a Block Analitica/B.Protocol duo, Gauntlet partnered with Morpho to create MetaMorpho Vaults. MetaMorpho vaults offer users a way to provide liquidity and earn interest passively by optimally supplying on a set of markets. Gauntlet's vaults have already amassed $14M in liquidity.
  • 💦🔬 Tx-Level Alpha: On Mar. 29, Maker's subDAO Spark deployed 100M DAI on Morpho Blue through its D3M module after a governance vote. Spark created its own MetaMorpho Vault to supply liquidity on markets collateralized by Ethena tokens USDe and sUSDe.

③ Kamino Finance 📊

📈 Kamino becomes the largest lending protocol on Solana with $1.2B TVL

  • Kamino is a Solana DeFi platform that combines lending, liquidity, and leverage products in a single unified platform. Today on Kamino, users can borrow and lend assets, provide leveraged liquidity to concentrated liquidity DEXs, use concentrated liquidity positions as collateral, build their own automated liquidity strategies, boost yield by using leverage, and go long or short certain assets. Kamino's TVL crossed $1B on Mar. 14, 2024 and currently stands at $1.2B, making it the largest lending protocol on Solana.
Source: DeFi Llama
  • Kamino's lending TVL is primarily comprised of SOL and various SOL liquid staking tokens, which comprise ~64% of TVL. Other major tokens lent are USDC, JLP and WIF.
Source: Flipside - @SocioAnalytica
  • Kamino's average number of daily active users over the last week is 8.6k, below its high of 19.4k but up significantly over the last 5 months. In total, 358.9k users have interacted with Kamino.
Source: Flipside- SocioAnalytica

④ Flux Finance 🌊

📈 Flux Finance surpasses $13.5M in tokenized US Treasuries used as collateral

  • Flux is a protocol that enables users to earn stablecoin yields collateralized exclusively by tokenized US Treasuries. Flux is the first protocol to support tokenized securities as collateral, supporting permissioned assets (such as OUSG) alongside permissionless assets (such as USDC). Since its inception, Flux has attracted a significant user base with a current TVL of $20.36M.
Source: forum.makerdao.com
  • At Flux, stablecoins like USDC, USDT, FRAX, and DAI can be supplied to mint fTokens, which earn yield. With 970 fToken holders, these tokens, akin to Compound's cTokens, appreciate in value over time. Currently, the most popular market is USDC, with a total of $4.27M supplied.
Source: fluxfinance.com
  • The target utilization rate of stablecoin pools at Flux is around 90%, with a sharp kink to incentivize borrowers to repay their loans should the utilization rate increase too far beyond this.
Source: fluxfinance.com
  • 💦🔬 Tx-Level Alpha: In this transaction, a user deposited 100,000 USDC into Flux, receiving 4.75M fUSDC. After depositing into Flux, depositors have other options, like leveraging fToken composability and utilizing fUSDC on protocols like Pendle. Flux exemplifies the modular lego blocks nature of DeFi, enabling users to creatively stack opportunities, illustrating its pivotal role in enriching the ecosystem with innovation and flexibility.

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