Morpho Blue

Morpho Blue is a permissionless lending primitive where each market is defined by five parameters set at creation and never changed afterward. The five parameters are the collateral token, the loan token, the oracle, the interest rate model, and the LLTV. Once a market is deployed, none of them can be modified by governance, by the deployer, or by anyone else. Borrowers post one collateral to borrow one loan asset, and the market's risk profile is fixed for its lifetime.

The design is a deliberate departure from earlier lending pools. Aave and Compound run monolithic pools where many collateral types share the same liquidity, and governance can adjust risk parameters after the fact. That flexibility carries a cost: a bad parameter change or a compromised governance vote can affect every position in the pool. Morpho Blue isolates each market. A liquidation cascade or oracle failure in one market can't spread to another, because the markets share no liquidity and no parameters. The tradeoff is fragmentation: liquidity spreads across many markets instead of pooling in one. The vault layer above Morpho Blue (MetaMorpho, or Vault V2) is what re-aggregates that liquidity for depositors.

Anyone can create a market on Morpho Blue by picking those five parameters and paying the deployment gas. That's what "permissionless" means here. It doesn't mean permissionless borrowing (borrowers still face the market's parameters), it means permissionless market creation. Rekord uses this to deploy purpose-built markets for institutional collateral types (tokenized pledges, RWA tokens) that wouldn't fit in a general-purpose pool.