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Published on Jul 06, 2023
Hello Whales and welcome to the little newcomers who have just joined us in the Premium edition!
Editorial byRaphaël Bloch
Twitter is broken 😤
Since its takeover by Elon Musk, everyone has been hoping that Twitter would turn things around, but we now have to face the facts: what was sold at the end of 2022 as a great transformation is in reality a huge rampage.
Every day, or almost every day, the social network loses quality. The user experience is poor, the incessant changes to the algorithm make it almost impossible to keep up with the news, not to mention the paid subscription system which, because it wasn't thought through beforehand, is turning into a gag...
Twitter obviously isn't going to disappear overnight (Grégory wouldn't get over it 😅), but it's now hard to imagine it retaining its place in online information sharing.
The big question is who will compete with it, or even replace it in the longer term. Will it be Mark Zuckerberg's new social network, 'Threads', which launches today in the US, or does the future belong to more decentralised social networks like Nostr, Bluesky or Lens?
At The Big Whale, we're convinced that decentralised social networks, which allow you to own your account, your data, and avoid depending on a single person (hello Elon), are the future. We have an account on Lens (add us 👋).
There remains the question of the use and accessibility of these 3.0 social networks, which still need to be improved. But at the rate Twitter is deteriorating, Lens will soon look like a model of its kind. Thank you Elon!
Redacted byRaphaël Bloch
👉 Aura: general secretary on the move
A page is being turned at Aura Blockchain Consortium. According to our information, the association's general secretary, Daniela Ott, is on her way out.
Appointed in June 2021, Daniela Ott, who has not responded to our requests, contributed to the development of Aura, which was launched in 2019 by LMVH with the help of Consensys. The project was then joined by four other founding members: Prada, Cartier, and more recently OTB Group (Diesel, Maison Margiela, etc) and Mercedes 🚘.
The aim of Aura, which works mainly with external service providers, is to provide Web3 solutions to luxury players. The luxury industry is one of the most dynamic on the subject (read our dossier).
Today, more than a dozen major brands are working with Geneva-based Aura on projects based on private blockchains. In fact, this is one of its main criticisms: Aura is not developing any truly decentralised solutions. Its main competitor is the French company Arianee.
Is this departure motivated by a strategic divergence or a desire to go elsewhere? We don't have the answer yet 👀.
Written by Grégory Raymond
While the industry is slowing down, Morpho is one of the few decentralised finance protocols (DeFi) to be on a roll. The application, symbolised by a butterfly, is soon ready for its great metamorphosis. 🦋
It was exactly a year ago. In the middle of July, France's Morpho announced an $18 million fundraising round, breaking the record for the biggest fundraising round for a student project. The record had previously been held by a certain... Mark Zuckerberg with Facebook.
Since then, a lot has happened in Web3, particularly with the fall in the markets, but Morpho has continued to develop.
Today, the project specialising in decentralised finance, which has, in the meantime, obtained the innovation of the year award at The Big Whale's Web3 Awards, can boast that it has attracted $860 million in value locked up ("TVL" for Total Value Locked) in its protocol.
The French project is now the third-largest player in lending, behind the historical giants of the sector Aave and Compound.
Its team has grown from 6 to 24 people in just a few months and its influence continues to grow, as we were able to ascertain by interviewing players in the ecosystem. 💪
"Morpho is the example that shows it is possible to succeed in DeFi despite the Bear market," points out Cyrille Pastour, co-founder of Swaap, a decentralised market maker. "They have succeeded in implementing an ingenious strategy, which has resulted in rapid development of the protocol and impressive growth in TVL," he insists.
Morpho's value proposition is simple: the application optimises borrowing and lending rates on Aave and Compound, which remain relatively inefficient. For borrowers, rates are often still too high, and vice versa. Morpho is "plugging in" to Aave and Compound to improve this situation.
"At the moment you can borrow USDC on Morpho with a rate of 3.3% and have your ETH collateral remunerated at 2.3%, while Aave offers rates of 3.8% and 1.3% respectively," boasts co-founder Paul Frambot. 💰
"Morpho meets a real market demand," confirms Stanislas Barthélémi, crypto expert for KPMG.
Despite its success, Morpho has so far generated no revenue. And for good reason, the app doesn't charge any fees 😅.
Morpho Labs, the start-up that develops the protocol, hasn't earned a single penny since its inception, despite seeing hundreds of millions of dollars pass through the system.
This decision is a choice by the team, which is banking on its unbeatable offering - there are no fees - to grow very quickly. "Morpho could earn millions of dollars, but we are more focused on the long term," asserts Paul Frambot. ⏳
"Current DeFi users are not our real target," insists the engineer, who is aiming for institutional users (banks, funds and others) and warns that "eventual" activation of fees should not see the light of day for "several years", while DeFi is more massively adopted.
In this respect, Morpho's model is similar to that of Uniswap, the undisputed leader in Decentralised Exchanges (DEX) since 2018, which also still does not charge fees after years of operation.
"Uniswap doesn't need money, they prefer to focus on the growth and efficiency of the protocol rather than extracting value from it. Uniswap's goal now seems to be to be both competitive and compatible with traditional finance, not just DeFi," insists Paul Frambot, who is close to Hayden Adams, Uniswap's creator.
Morpho is in a similar situation thanks to its 2022 fundraising with several large investors, including the prestigious US venture capital fund a16z. 🤑
Morpho therefore has plenty to look forward to, even if its spending on security is colossal: to carry out all its audits, particularly on security, the project has already spent several million dollars. But the results are in: Morpho has been rated 98/100 by DeFi Safety, a benchmark tool for measuring the security level of a protocol. To date, this is the highest rating awarded by DeFi Safety. 🔬
"Like Swaap, Morpho invests significantly in security and research," emphasises Cyrille Pastour. "These investments are not only beneficial for Morpho, but also for the entire DeFi infrastructure, which will gradually open up to the traditional financial system."
While Morpho has always presented itself as a means of optimising lending solutions, the project has never hidden its longer-term ambitions: to develop its own tool and no longer go through "partners" like Aave to find liquidity.
🔴 According to our information, this possibility should materialise in the next few weeks.
"We are the first fans of Aave, but the project has its limits and we are innovating to offer other solutions", Paul Frambot insists.
What impact could such a change have on Aave and the other DeFi players? It's hard to say. "The risk for them is of being bypassed, even if Aave's size and reputation make it a leading player," explains Brice Berdah, an expert in decentralised finance and leader of the DeFi France community.
The latter would find it more credible for Morpho to position itself as an aggregator of lending platforms to offer and execute loans on the best market terms from existing solutions.
"That's exactly what Paraswap does, which aggregates all the DEXs to offer the best exchange conditions at a given moment," explains Brice Berdah.
"It's natural to want to take on the sector leader," says Stanislas Barthélémi, for his part, who stresses, however, that one shouldn't have one's eyes bigger than one's stomach. "It's not yet totally established that there is sufficient demand for a new competitor of this kind", the consultant judges. 🤔
Aave is playing the complementary card. For Marc Zeller, in charge of AaveChan, a delegation platform within Aave's governance, "DeFi is used by less than 1% of the finance industry. Morpho is making it more attractive and that's good news for the ecosystem in general."
Contacted by The Big Whale, Aave creator Stani Kulechov declined to comment on the matter.
"Decentralised brokers" versus "real protocols"
The Morpho team nevertheless seems to be preparing minds for the coming "battle" ⚔️.
Regularly, those in charge of the project point to the average performance of Aave or Compound, which offer less attractive rates, and the relative capital inefficiency of these same platforms; this inefficiency is expressed through the (more or less attractive) ratio between borrowing capacity and the collateral that must be deposited.
In a blog post published on 30 June, Paul Frambot explains, for example, that the main lending platforms would be more like "decentralised brokers" rather than real protocols. 📣
"I define decentralised brokers as DeFi platforms that allow direct financial interactions, but require active human intervention to function properly," explains Paul Frambot.
In particular, he points out that Aave has 1,200 risk parameters that are regularly updated by its governance. These parameters apply to the hundred or so markets offered by Aave and to the 8 blockchains compatible with the protocol.
"This system has a crazy cost that weighs on AAVE token holders", stresses one expert.
"To manage all these parameters successfully, Aave pays millions of dollars to risk experts such as Gauntlet or Chaos Labs", says Paul Frambot. "Every day, the DAO votes 100% for the new parameters proposed by Gauntlet, even though the calculation of these parameters is completely closed source", he insists.
"With this system, no one is able to say whether Aave is safe without trusting third parties", Paul Frambot slips in. 😬
This model is present in most of the big names in DeFi. It requires members of the DAO to monitor and update the data on an almost daily basis.
Thus, it stands in contrast to "real" protocols, which do not require trust in others and "have the potential to form a basis on which financial products can be built", believes Paul Frambot, who thus provides some clues as to how a new version of Morpho might work...
But is it that simple?
"Creating a loan market is not as easy as creating a liquidity pool on Uniswap," tempers Stanislas Barthélémi of KPMG. "You have to check that the liquidation works, that the assets chosen as collateral have collateralisation parameters in line with the liquidity, and that there is concentration and market depth in each asset", he adds.
Will Morpho be able to do this? Answer in a few weeks...
🎙 Click here to listen to the Big Talk again and find out all about current market conditions. (please note some technical issues with Twitter during the recording)
Written by Konohime
Each month, The Big Whale analyses an emerging collection of NFTs.
For this third edition, we've chosen to look at "Ekos" a collection launched by the founder of... Marvel Studios.
The sequel is available on The Big Whale website 🐳