In a noteworthy development within the burgeoning decentralized finance (DeFi) sector, Gauntlet, a prominent player in risk management for DeFi platforms, has announced its transition from collaborating with aave to working with Morpho. This shift comes shortly after Gauntlet’s departure from aave, a leading DeFi lending protocol.
Gauntlet’s Strategic Partnership with MorphoBlue
Announced on February 27, Gauntlet and Morpho have entered into a partnership to create lending products on MorphoBlue, an innovative protocol that allows firms to establish their own independent lending and borrowing pools, referred to as “vaults.” Unlike traditional lending protocols where firms depend on external risk management advisors, MorphoBlue enables risk managers like Gauntlet to build and manage lending protocols autonomously.
Gauntlet’s Reasons for Departing from aave
John Morrow, Gauntlet’s co-founder and operating chief, shared his reasons for leaving aave in a forum post on February 21. Morrow explained that Gauntlet encountered difficulties adhering to inconsistent guidelines and unspoken objectives of major stakeholders within the aave Decentralized Autonomous Organization (DAO). This rift occurred just two months after Gauntlet signed a substantial one-year contract worth $1.6 million with AaveDAO, marking a significant shift in Gauntlet’s operational direction within the DeFi ecosystem.
Morpho: A Direct Competitor to aave and compound
With uncertainty surrounding Gauntlet’s future partnerships post-aave, Morpho has emerged as a fitting collaborator. Co-founder of Morpho, Paul Frambot, emphasized Morpho’s competitive stance against aave and compound by positioning MorphoBlue as a direct competitor to AaveV3 and CompoundV3. Frambot criticized aave’s efforts to hinder Morpho’s growth through programs like the Merit reward system, while also highlighting Morpho’s commitment to transparent incentives and robust risk management mechanisms for its users.
Market Dynamics and Gauntlet’s Decision to Split
Despite Morpho’s growing presence, aave remains the dominant force in the DeFi lending market with over $9.3 billion in total value locked (TVL), compared to Morpho’s $2.7 billion and compound’s $978 million, according to DefiLlama data. In a statement, Frambot characterized Gauntlet’s departure from aave as inevitable due to misaligned incentives, scalability challenges in cash flow management, and the intricacies of navigating political dynamics intertwined with complex mathematical models.
