Moonwell

Author(s): Block Analitica and B.Protocol Related Discussions: https://forum.moonwell.fi/t/introducing-moonwell-metamorpho-vaults-next-gen-defi-lending/960 Related Previous Proposal: MIP-B21: Accepting Ownership and Incentivizing Moonwell MetaMorpho Vaults Snapshot Temperature Check Proposal: https://snapshot.moonwell.fi/#/proposal/0x5532648504670e4ec705d62fe2bb9d835db9c26c0f8befe839c7226a2a2d9cdd

Summary

This proposal seeks to extend and optimize the highly successful Moonwell Morpho Vaults incentives program for an additional 6-month period and transfer ownership of the newly created Moonwell Frontier cbBTC Vault to the Moonwell DAO. Since launching on Base in July 2024, the Moonwell Flagship Vaults have emerged as the dominant market leader on Morpho’s Base deployment, with a current TVL of $170M, and demonstrating unmatched growth and adoption. Given the program’s success and the significant appreciation in WELL token value since the initial grant, we propose a revised incentive program of 18M WELL tokens for the next 6 months (reduced from 50M). This proposal also introduces the Moonwell Frontier cbBTC Vault, designed to capitalize on the growing demand for cbBTC borrowing demand within the Base ecosystem, positioning Moonwell to attract additional cbBTC liquidity and borrowing activity.

Success of Initial Program

Since the activation of Moonwell Flagship Vaults in July 2024, we have achieved exceptional growth and overwhelming market dominance.

Current Vault TVL:

• Moonwell Flagship ETH Vault: 30,309.32 WETH ($116.64M)
• Moonwell Flagship USDC Vault: 42.34M USDC ($42.33M)
• Moonwell Flagship EURC Vault: 11.07M EURC ($11.55M)
• Total TVL: $170.52M

Market Dominance:

• Moonwell Flagship Vaults represent 83% of all Morpho Vault TVL on Base.
• Flagship ETH Vault: Nearly 11x larger than the next largest ETH vault (Re7 WETH at $10.75M).
• Flagship USDC Vault ($42.33M): 15x larger than the next largest USDC vault (Gauntlet USDC Core at $2.87M).
• Flagship EURC Vault ($11.55M): 49x larger than the next largest EURC vault (Gauntlet EURC Core at $234.28k).

Key Achievements:

• Explosive Growth: In October alone, the Moonwell Flagship Vaults achieved a 224% TVL increase
• Market Leadership: Moonwell Flagship Vaults dominate key lending markets:
  • 95% of the wstETH/ETH market (~$28M borrowed)
  • 82% of the cbBTC/USDC market (~$10.1M borrowed)
  • 99% of the wstETH/USDC market (~$12M borrowed)
• Broad Adoption: 22,000+ total depositors across the Moonwell Flagship Vaults
• Technical Advancements: Implementation of Block Analitica’s state-of-the-art vault allocation model has enhanced:
  • Risk-adjusted returns for suppliers
  • Profitable leveraging for borrowers
  • Competitive market rates through dynamic reallocation
  • Conservative risk management with blue-chip collateral

This remarkable performance validates our thesis about the demand for optimized lending within the Moonwell and Morpho ecosystems. It also highlights Block Analitica and B.Protocol’s robust risk management expertise and continued pursuit of further innovation.

Moonwell Frontier cbBTC Vault

Why Frontier Instead of Flagship?

The Moonwell Frontier cbBTC Vault represents an expansion into higher-yield liquidity strategies designed to attract sophisticated DeFi participants. Unlike the Moonwell Flagship Vaults, which focus on supplying into more conservative, blue-chip markets, the Frontier Vault series allows users to supply assets that are strategically deployed into more risk-on Morpho markets like emerging Bitcoin derivative markets, enhancing liquidity and borrowing opportunities across the ecosystem.

Key Reasons for Differentiating as “Frontier” Include:

• Higher Risk/Reward Profile:
  The Frontier Vault reflects additional risk considerations stemming from newer assets like Lombard BTC, or LBTC, which represents Bitcoin staked into Babylon by Lombard. Babylon is analogous to Eigenlayer, and allows the economic security guarantees of Bitcoin to be extended to other protocols, which should eventually become a yield-bearing Bitcoin derivative.
• Market Positioning:
  By clearly delineating the vault as part of the Frontier series, Moonwell avoids user confusion with Flagship Vaults, which cater to a more conservative risk appetite.
• Appealing to Advanced Users:
  The name emphasizes our commitment to empowering advanced DeFi users with innovative opportunities.

Why cbBTC?

The timing for launching the Moonwell Frontier cbBTC Vault is critical, as DeFi activity surrounding cbBTC on Base has surged.

• Impressive cbBTC Metrics on Base: Over 4,054 cbBTC (~$2B) is currently deployed on Base, demonstrating significant interest in the asset. Furthermore, Aerodrome’s WETH/cbBTC and USDC/cbBTC concentrated liquidity pools are the #2 and #3 highest volume pools on the DEX with over $2B of combined volume. These pools represent lucrative opportunities for LPs and will likely bolster borrowing demand for cbBTC.
• High Borrowing Demand Potential: Market data indicates that cbBTC is a highly sought-after asset for LPs and leveraged strategies, making this an ideal time to establish a dedicated lending vault to capture this activity.

Moonwell’s Frontier cbBTC Vault aims to capitalize on this momentum while offering users competitive rates and a seamless lending experience.

Strategic Opportunities

• Enhanced APYs: Moonwell Frontier cbBTC Vault suppliers will benefit from competitive yields, including WELL and MORPHO incentives, creating a compelling value proposition for vault depositors.
• Diverse Market Options: The Moonwell Frontier cbBTC Vault will supply into markets such as USDC/cbBTC and ETH/cbBTC, and potentially expand into restaking derivative markets in the future, enabling broader participation and bolstering adoption through strategic liquidity deployment.

Vault Parameters

• Vault Ownership: Moonwell DAO
• Risk Curation: Block Analitica & B.Protocol
• Performance Fees: 15%, split between Moonwell DAO and Block Analitica / B.Protocol
• Timelock Period: 4 days

Proposed Incentive Renewal Terms

Incentive Allocation:

• Total WELL Tokens: 18M WELL (reduced from 50M)
• Incentivized Vaults: Moonwell Flagship USDC, Moonwell Flagship EURC, Moonwell Flagship ETH, Moonwell Frontier cbBTC
• Duration: 6 months (December 16, 2024 - June 16, 2025)
• Distribution: Flat allocation across three 2-month periods, distributed by and subject to the discretion of the Morpho DAO:
  • Months 1-2: 6M WELL
  • Months 3-4: 6M WELL
  • Months 5-6: 6M WELL

Unchanged Parameters:

• Vault Ownership: Moonwell DAO
• Risk Curation: Block Analitica & B.Protocol
• Performance Fees: 15%, split between Moonwell DAO and Block Analitica / B.Protocol
• Timelock Period: 4 days

Proposal Submission Limit Adjustment

To streamline governance and maintain an efficient voting process, this proposal also introduces a limit of two active proposals per contributor at any given time. This housekeeping measure is designed to enhance the governance experience by reducing voter fatigue and ensuring a more focused discussion on active proposals.

Implementation

If this proposal passes, the following actions will be executed:

1. Transfer 18M WELL tokens to the Moonwell Morpho URD contract
2. Continue existing distribution mechanism through merkle roots
3. Maintain current operational handling of incentives by the Morpho DAO
4. Cap the total number of active proposals per contributor at two

Voting Options

• Yay: Approve the renewal grant of 18M WELL token incentives for Moonwell Flagship and Frontier Vaults, the transfer of ownership for the Moonwell Frontier cbBTC Vault to the Moonwell DAO, and the introduction of a cap on the number of active proposals per contributor.
• Nay: Reject the renewal of WELL token incentives, the transfer of cbBTC Vault ownership, and the proposed cap on active proposals.
• Abstain: Choose to participate in the vote without expressing support or opposition to the proposal.

Conclusion

The Moonwell Flagship Vaults have become a cornerstone of Moonwell’s lending ecosystem, delivering unparalleled market dominance, strong user adoption, and consistent TVL growth. Renewing this program aligns perfectly with Moonwell’s mission to simplify lending for everyone while reinforcing our leadership on Morpho.

Additionally, the introduction of the Moonwell Frontier cbBTC Vault positions Moonwell to capitalize on the explosive growth of cbBTC and other Bitcoin derivatives on Base. By leveraging cbBTC’s high demand and significant liquidity, this vault aims to attract substantial borrowing activity while offering suppliers competitive yields.

With 18 million WELL tokens dedicated to liquidity incentives and a performance fee structure designed to increasingly benefit the Moonwell DAO as Vault TVLs grow, this proposal ensures long-term sustainability and rewards continued success. With over 22,000 depositors in Flagship Vaults and approximately $170M in TVL, this proposal represents a scalable and strategic approach to sustaining Moonwell’s momentum, maintaining market leadership, and advancing its mission to make onchain finance accessible, secure, and simple for all.