Morpho Is Growing—Does MORPHO Actually Get Paid? | Daily Crypto IQ

0:00As we break down a project, we look at its products. We look at the ecosystem of the product. We're much more concerned with the token because this is not a stock, right? This is not you buying a piece of ownership of the company. No, this is much different. And I think this is where a lot of people really could use some IQ, crypto IQ, right? Raising. And I I just coined that term. Okay, I'm not trying to be like I'm the smartest guy in the room. I'm

0:24here with you guys learning as well and holding myself accountable to raise my own crypto IQ. Really want to make that point, [music] right? But I think that people associate owning the token in crypto, the asset, the unit, whatever you want to call it, the coin doesn't really change what it is. They they confuse that with owning some kind of share of the company or the products look really good that the new startup in the crypto space has created and they

0:53think that the coin will do well because of that. And that's about all the research they do. And if they do some research, this is a real common thing I really want to say is that they'll do research because they want to buy a coin, but they'll do all their research on the project and the product, maybe some ecosystem, but not the relation between the two. And that is the gap that we have found most necessary to uh bridge, right? So, we're going to start

1:22with Morpho. its lending infrastructure and it's useful enough that Coinbase has introduced fixed rate cryptoback loans powered by Morphos Midnight and I noticed that like normally USDC yield that you can get for staking USDC I think it's like almost 4% it's like 3 something almost 4% but they've integrated Morpho and if you use Morpho through Coinbase right in the app you get a lot closer to like 6% I think it's 6.1% now that's moving towards that 10%

1:54number that is very meaningful for just staking a stable coin because with a stable coin just like we did stable coin rails last week you're not getting mixed up in the whole is it going to go up or down hopefully you know shout out to Luna right Luna classic all right so that is a real product development not another announcement announcing an announcement right but a borrower paying interest a lender earning a return and Morpho holder benefiting

2:27Morpho coin holder benefiting from any of those events are very different. So the butterfly on the branding does not merge their bank account, right? Does not merge with the bank account. It's pretty funny. So we'll explain the lending products, follow the payments, and examine the risks and supply and finish with a full daily crypto IQ scorecard. who actually passes, right? Let me see what's going on in the background. OBS reconnected

2:58successfully. Hopefully you guys didn't have any interruption there. I don't know what that was about. So, as I have done before, I'm going to do a couple announcements. Nothing crazy. My usual announcements and stuff just so everybody knows. Then we're going to get into it. I have some nice slides for you. That's what I was going to say. And I'm really liking doing the slides versus reading our organized notes, right? Uh I think it's

3:23a much better vibe. First and foremost, smash that like button and subscribe if you're just rolling in. I see a few people rolling in late or early cuz we really just started. But anyways, check out that membership. Starts at $2.99, right? Three bucks a month. Get custom emojis that I made. And there's a couple other benefits. You get to watch videos before they actually come out and stuff like that. Although I haven't been making a lot of long- form content

3:47videos, the live stream is kind of my main sauce. But I think $3.99 a month to support the channel is what it's really about. I want to make that clear, right? I And I I was thinking this today. I really wanted to say this to everybody. I spend not just time, not even counting time, I spend more money on putting this information together and doing this than I'm making off of YouTube, right? Just in the the tools that I use, uh subscriptions that I have to different

4:13things. I spend probably three, four times more money than I actually make on YouTube. And I'm not complaining, but the more support the better. The more I can focus on this and give you better content every day. So, check out those memberships. They start at $3. There's other ones if you're able to support the channel even more. It is greatly appreciated. Moving on from that though, we got rid of the ad revenue, right? another reason to support the channel

4:37for your viewership because people said they were tired of me getting cut off in the middle of what they were trying to listen to with an ad. So, we turned that off. Another reason to support the channel. Let's see what other announcements do I have other than it's Monday and we're back at it, right? I think that's just about it. So, let's take a look at Morpho. We're going to touch on its tokconomics and things in the token autopsy, but we'll just do it

4:58real quick. First, let's look at the MAX chart, right? And the max chart says it's up 114% which if you look at the max chart of a lot of tokens not so bad but morpho only token generated or to tge token generation event you'll see that abbreviation a lot if you read websites and stuff like that about November 20th at about a$128 and then it shot all the way up to its all-time high of $3.92

5:28and that was 2024 then into 2025. You know how that went and we are moving our way up. Now we're at $2.74. So, how long before we're in price discovery for Morpho? It's a lending product. It has a lot of actual use case and reason to be around. But is there a reason to hold the token associated with it? I want to know that and deep dive it for you guys, but for myself as well, I'm not sure if Morpho is a token that should be in my portfolio.

5:57Market cap 1.9 billion. So, just slightly under two billion right now. Max supply 1 billion, but that's not infinity, right? A lot of the stuff we were looking at last week had like infinite max supplies. That's not my favorite by far. And if you don't know your tokconomics, highly, highly, highly recommend that you just it won't take you long. It's not that complicated, but just take an hour and learn your tokconomics. It's really not

6:24that complicated. And as always, I want to encourage everybody if you hear words that you don't know, ask, right? Or just look them up because a big part of this space, if you're new here, and a lot of people we're going to see in the next 6 months coming in are going to be new here. Just take an an evening or two evenings, split it up, and just learn some definitions, and you will find they're not that complicated. They're just big words for things you already

6:47know. Anyways, enough of that. Reliable Jay rolling in with those custom emojis. Thank you, Reliable Jay, for always being so reliable. I appreciate you being here. All right, so total value locked looks like 11.4 billion. 24-hour trading volume 20 million and circulating supply 700 million. So, uh 1,000 million is a billion, right? If I if I still remember math, and I may or may not, 300 million coins left to come out. But circulating

7:16supply is what is here now. It's pretty much right on the money. 700 million, which tells me, all right, let's just do this real quick cuz this is tokconomics 101. When more coins come into the circulating supply, they get minted on chain, they come into the circulating supply, that is inflation. If there's a mechanism, what we usually call burning, they're gotten rid of and they go away from, they go out of the circulating

7:46supply. We call that dilution or not dilution, sorry. We call that um deflation. I don't know where my mind is. Got to lock in. So anyways, you have inflation deflation. If you hold a coin, the market cap, I might as well just say the whole thing. You take circulating supply and then you divide it by the market cap. That will give you price per unit, price per coin. There is another way to do it, but you don't need four ways to do the same thing. Just one that

8:16works, right? There's like two or three ways to come up with the price per unit. My favorite is take circulating supply, divide it by the market cap, and that will give you this $2.74. Why is that important? Well, the number that you're dividing it by, the circulating supply, if it increases, that decreases your price per unit. If it decreases, that increases the price per unit. And if you didn't follow that at all, don't worry. I go over it and

8:42talk about it all the time. Enough of that. Let's talk about some Morpho. Camsta in the house. Welcome in. Welcome in. Cam, have you ever used Morpho? [music] Also, anybody hold Morpho? Anybody out there holding Morpho? I wish Melissa was here. I bet she holds some Morpho. My slides just keep getting better and better. They're going to look super pro here in no time. All right, so as you know, token autopsy, you have Morpho the

9:12project, right? And then the coin is actually called Morpho as well, the ticker, right? A lot of them like Tron has TRX, right? A lot of them a lot of them have an abbreviation. This one doesn't seem to have that. [music] So, we're going to follow the yield and find out who actually gets paid. It is October 5th. Anybody know the significance of October 5th? Right. They say from the bottom of one bare market for Bitcoin, which controls the market

9:41here, uh to the next bottom is 1,028 days. I'm pretty sure that's right. And it should be October 5th. So today, and things rhyme, they're not always perfect. Today, around the next couple of weeks, maybe [music] this month, we should know that the bottom is in and no more bare market. But we will see. We are holding I believe above what 84,000. What's the price of Bitcoin right this second? Can somebody tell me? I could go look but I don't want to get away from

10:12our token autopsy. Maybe we'll do it at the end if nobody answers. Anyways, the core frame of what we got going on is follow the yield. That is the series and who actually gets paid. a borrower paying interest, a lender earning a return, and a morpho coin holder, [music] asset holder benefits are three different events. These are the things you want to start being able to break down and separate. I believe that if you

10:37come to this stream often, follow with the token autopsy report. It is going to really put your mind in the ability to kind of quickly discern these things in any coin that you look at, right? Reliable Jay being super reliable. 85K. Nice. So, I'm just gonna say this real quick. I I always want to go off on a tangent, but I don't want to make it too long. So, we really needed to hold above like 83,5, call it 84,000 to 84,5

11:08uh for a week or two to really confirm that the bull market is here because that gets us back above some very critical levels. If you remember a pump that we had, I want to say it was like two and a half months ago, maybe three months ago, we got right up to this spot and that 835 was like solid resistance and we went back down. Looks like we got what we wanted this time around. We got back above it and

11:36we're holding. So, as long as we can hold, in my opinion, for another week or two, we should be looking great. I'm not talking about a little dip for, you know, Bitcoin [music] drops 10,000 and goes right back up. I'm not talking about that. I'm talking about consistently losing 835 and then staying under it. That that would to me signal a problem with our bull our bull run here. Anyways, the butterfly on the branding of Morpho, right? Because that's its

12:02brand does not merge their bank accounts. So a successful product and its token can appear in the same sentence without having the same financial rights. That is convenient marketing if I say so. It is not an ownership agreement. Separate the product user, capital provider and service operator and token holder. Identify what each contributes receive and can lose. So risk educational analysis not financial advice. What you

12:36may not know is that a vault recipient is not the Morpho token and a vault shares represents like a share of the vault represents a position in a particular strategy. Morpho represents governance [music] participation. Owning one does not guarantee the economic rights of the other. So if you have a stake or a share in the vault, that doesn't necessarily mean you hold the token and vice versa. So owning one does

13:08not guarantee the economic rights of the other and borrowing rates and lending rates return differ. Some supply capital remains unborrowed. Utilization measures how much of the market supplied loan asset is being borrowed. A borrower paying 8% does not mean every supplier is earning 8%. And a fixed rate does not mean fixed safety. They're all things we got to separate. It might feel a little bit like you're in class to be a financial adviser, but it is what it is.

13:40We got to learn about lending, right? We got to learn about what's going on. And again, not so much so that you're a whiz at lending, but so you know if there's any value in the token associated with it. So Midnight fixes financing terms. [music] Collateral can still lose value and unhealthy positions can still be liquidated. The interest rate may be calm while the collateral has other plans. What is noise here? Signal versus noise. One of my favorite segments that

14:10we get to, right? So what is noise or less important to none to not important at all is large deposits are treated as token holder income. What is signal is important is deposits show capital using the system follow actual payments before calling them earnings. Noise less important a fee switch exists so holders will eventually get paid. Important compatibility approved policy collection and distribution are separate milestones.

14:44Less important, a recognizable financial company integrates the product, aka Coinbase, making every associated investment safe. That would not necessarily be true. What is important is that integration supports adoption. It does not guarantee collateral, quality, withdrawal, liquidity, or even token returns. Identity and purpose. So, now we get into Morpho. What is Morpho? Well, it supplies infrastructure for

15:14onchain lending. Oh, that coffee is good. All right. Borrowers obtain financing against collateral. Lenders supply the capital and applications can build interfaces and products around these markets. I'm actually going to read that again because one of the tricks to what I'm doing here is, well, I don't know if I call it a trick. I don't know where that came from. But one of the things I'm trying to do here is make it as absolutely simple for you to

15:42understand complex stuff that you probably didn't think you would be able to understand. Because in all actuality, a lot of this stuff is not that complicated. It's just never been broken down for you. What I need from you is just to watch, is just to listen and try. That's it. So borrowers obtain financing against collateral. So people borrow Lenders are the ones supplying that capital that they're borrowing and applications can build interface and

16:12products around these markets. What is the market? The borrowing and lending of capital. So blue verifiable rate lending market. I don't know why it says blue here. I'm not a wiz on Morpho. Like I am genuinely learning with you guys. I've read a lot of different websites, a lot of different product uh about lending or yield. But that doesn't mean I know everything about Morpho specifically. That's the beauty of this is I get to go in here and share this information with

16:41you and then reinforce it and learn little intricate things myself. So Midnight fixed rate fixed maturity lending and market. So, I don't know if midnight is [music] like midnight the coin, right? Associated um that was supposed to be a part of Cardono, but then I haven't got to the bottom of it, but there's a lot of people online mad about Midnight and Cardono. It was it was like not launched on Cardono or something

17:08like that. Does anybody have a little bit more information about this? Something I should know more about. I just haven't. I don't live very much in the Cardano ecosystem. Not really even sure what to say about Cardono. Although I do hold some Cardono from like forever ago, but the point here is that I believe that's the midnight that would normally is supposed to be associated with Cardono, but it seems like it's integrated into a lot of

17:32places. So managed allocation, these are vaults, right? They're managed allocations of depositor capital through approved strategy. These are complimentary products, not three names of the same loan. Uh the pro Yeah, we got some overwriting here. Hopefully this doesn't happen. So the practical problem is coordination connecting usable capital with borrowers while making collateral rules, interest, and risk management inspectable.

18:06Hopefully we don't have too much of that overlapping. I didn't see much of that, but I must have missed that one. So how blue works. Okay, so blue must be the product, right? Lenders supply the loan. Blue market isolated assets and collateral pairs. And then you have the borrowers who post collateral and receive loan assets. Interest research lenders. Liquidation responds if collateral fails. So you can get liquidated. One of

18:35the things that's kept me a little bit away from uh you know decentralized lending and stuff is I don't really understand all of the parameters about how I could get liquidated and who wants to get liquidated on a loan? That sounds terrible. So how blue works a blue market pairs one asset with one collateral asset. Its configuration specifies an oracle liquidation loantoval threshold and interest rate model. The oracle is the price fed or

19:08feed used to value the collateral. Uh think of chain link oracles live data that can be trusted or is accurate inside a decentralized landscape is so important. It's why chain link has done so well. So liquidation loan to value or what they call LLTV the debt to collateral threshold beyond which a position can be liquidated. This is talking about how you would get liquidated. Markets are isolated.

19:40Lenders choose exposure to a particular configuration rather than automatically sharing every market credit risk. So it sounds like it's highly specialized as a product. Market creation is permissionless within the supported parameter framework. Isolation is useful. It does not make a bad collateral suddenly good. Several isolated markets can share the same vulnerable oracle or issue. So, we're kind of touching on the fact that if you

20:07have a data feed from an oracle or wherever you're getting it from, that is a risk factor. We've seen problems with data feeds and things. And if it says, hey, like imagine you have an oracle, it's feeding data and it glitches out, it messes up, whatever, however that happens, and it reports the wrong number and therefore you get liquidated on your loan, you can't really call a help desk, can't call the front end, right? You can't

20:35call, you know, the product service management. Uh, you just got liquidated. But what if that oracle fed the wrong number and that number was never real? like it would it never dropped to that or went up to that whatever it is. Uh that's a big problem. So that's risk and I don't know what you would do about it. Maybe you go in the DAO if they have one and write to them. I'm sure they do and what what can they do for you? I'm not sure. Maybe if it happened on a mass

21:02scale they would do something. But that sounds like a mess. Anyways, anatomy of a loan. Let's get into this hypothetical blue style loan. $100,000 in collateral. The debt 60,000. So your starting LTV is 60%. 75,000 collateral equals 80% LTV. Unchanged debt reaches the assumed threshold. Interest can bring it sooner. Illustrated blue style position, not a live market quote. A borrower post

21:40collateral worth 100,000 and then borrow 60,000 on that. Starting loan to value is 60%. Calculated as debt divided by the collateral value. Assume an 80% liquidation threshold. If collateral falls to 75,000, unchanged debt of 60,000 reaches the threshold. A further decline makes the position eligible for liquidation. interest increases debt over time. So, the real threshold can arrive sooner than a calculation that freezes debt.

22:17Now, if that went over your head, I'm kind of right there with you. I very loosely understand that. But that is where I a lot of times have stayed away from this kind of stuff in my personal finance obviously because I don't want to get liquidated on a loan. That sounds absolutely terrible. So, liquidation is not a personal insult from the protocol. It is intended to protect the lender before collateral becomes insufficient. The borrowing limit is not a promise

22:45that collateral cannot fall through it. Now, what what gets me a lot of the time is if you have a loan, like say you take out a loan with one of these places. There's many of these decentralized lending platforms, right? And then you go into a bare market and whatever collateral you put up for the loan, it starts tanking. Like say it's in Bitcoin or Ethereum and it tanks. We lo in bare markets in a year. Like you

23:15could lose 70 80 95% of price. That's got to get you liquidated, right? How would that not get you liquidated? And say you put up a h 100,000 and you borrowed 60 and you put that 60 in crypto somewhere else. Well, it's also fallen in value a lot. So then what do you do, right? Because you can't pay it back because what you borrowed, you bought something else that was maybe speculative or maybe you just bought more. You know, maybe

23:47you took 100,000, you borrowed and then you bought 60,000 of the same thing. Maybe it was all Bitcoin. But when it drops, it drops and it's not going. If you go into a bare market, it's not going up anytime soon. So, what do you have to do? Go in and keep trying to feed more collateral as it dumps and you need more collateral. It just becomes a really bad cycle. It's where a lot of people lose the most money, right? And so, that is the type of thing that

24:12worries me. Now, if I guess if you're borrowing money with 100,000 in assets from the bottom of the bare market or somewhere thereabout and then it goes up, so it's worth more as far as covering your your basis there on your debt, then that could be good. But I guess you better time it right and sell somewhere near the top. Otherwise, you're going to be in trouble. That's my understanding and why I stay away from it a lot. It seems like it's only really

24:37worth doing in the bottom of the bare market. Anyways, I could have that a little bit wrong. If somebody knows it better than me, feel free to shout that out. We are doing the token autopsy. Morpho, if you're just running in, throw something in the chat. Let us know you're here. I saw a couple people come in. So, utilization measures borrowed loan asset against supplied loan assets in a particular market. When capital becomes scarce, a responsive rate model

25:04can raise borrowing costs, encouraging repayment and attracting supply. When capital sits idle, rates can adjust downward. And I know this is a lot to take in. Probably feels like you're going to school to be a financial advisor, but [music] how can we raise our crypto IQ if we never challenge ourselves? And that is the motto of the channel. Raise that crypto IQ. So, Blue's adaptive model changes with utilization and conditions. Rates are

25:33not permanent yield coupons. A high borrower rate does not automatically produce an equally high supplier return. Not every supply do uh Daro. Whoa. Not every supply dollar is borrowed. You like how I combined dollar and borrowed? Daro. I like it. Let's roll with it. So high utilization can improve efficiency while reducing cash immediately available for withdrawals. Do not divide headline protocol loans by headline total value locked and call the

26:09rest and call the results market utilization. Right? Those aggregates can cover different assets and accounting scope. So just because the money's there doesn't mean it's all in one place. Right? What midnight changes? So, we're going to get into the whole midnight thing. Financing today, repayment at maturity. Rate and date can be planned. Collateral can still fall. Liquidations and exit price still matter, but it seems like it

26:38helps out. Midnight uses market units tied to a maturity date. Their trading price implies the financial rate. Lenders hold credit against the market. borrowers owe repayment to it, not necessarily to one permanent matched individual. So, I guess this gives some flexibility. Early exits involve repayment or opposite direction trading. Available pricing and liquidity still matter. The benefit, a borrower can budget financing

27:13costs and repayment dates instead of accepting a constant changing rate. The limitation though, collateral risk, liquidation, maturity obligations, and exit conditions remain. Current application, Coinbase's September 22nd announcement introduce fixed rate BTCbacked [music] USDC loans powered by Midnight. And I've seen a lot uh of even regular institutions, right, talking about having Bitcoinbacked mortgages and things like that.

27:49can't say that I fully understand it. And the fact that if you have so much money as collateral and then Bitcoin tanks in a bare market, what does that look like for your supposed collateral? I mean, the Bitcoin are still there, but it's almost like you would have to have it value in in in number of Bitcoin, right? So, instead of saying I have $200,000 worth of Bitcoin as collateral, it should say or be

28:22something more along the lines of like I have 20 Bitcoin as collateral. It'd probably be more like 12 Bitcoin or whatever, but I'm not doing the math, right? Depends on what the price of Bitcoin is, right? But if if the number of Bitcoin are collateral, then your backing on your loan should remain consistent. But if it's valued in US dollars, which I'm sure it is, well, that's going to fluctuate. That sounds highly stressful when you're riding down

28:51to the bottom of a bare market and you've taken out a BTC mortgage and you're two years into it and all of a sudden you start that bare market. Uh, I don't really see how that works, but they feel they feel like they've figured it out or they feel like at that point you get liquidated. They get to keep your Bitcoin. Sounds real good for them, maybe not so good for you. So, what what midnight changes here? Well, Coinbase provides the customer interface and the

29:17well-known branding and all of that jazz with Morpho's infrastructure and base settlement underneath. So, they're teaming up to supply the market. This demonstrates distribution through a familiar application. It does not give more holders Coinbase equity or automatic share if a loan of the loan interest, right? What do vaults do? So, what is a vault? Anybody know what a vault is? A vault accepts an asset and issues shares

29:49representing the depositor's position. As net asset changes, the asset attributable to those shares change. The share is an accounting claim on the vault, not a principal guarantee and not another name for Morpho or its coin. So there there's all kinds of different things and this is just a little side salad for you, but there's all kinds of different things to understand that are very close together but are not the same. Staking, a vault, a liquidity

30:22pool, and there's probably a couple other products that are very similar because there's variations of vaults and liquidity pools and stuff like that. But just on main main vein category, right? Vaults, liquidity pools, um, and what was the other one I just said? Uh, I already lost that thought. Anyways, those are different financial products that are not the same. And I see people kind of interchange vaults

30:49and liquidity pools and stuff. They are not the same thing. So vault volume 2 uses adapters connections to permitted underlying yield sources. Configuration can limit exposure by asset oracle or other shared risks. The benefit is delegated selection and allocation. The cost is understanding another party strategy permissions and fees. Again, from what I gather, vaults are like a specified specific strategy that's been put forward, right? A financial strategy

31:25at that. And then you basically put money into the vault, which is you saying, "Hey, I'd like a share of that strategy. Looks like a good strategy. I'd like to make money with you." But how many people throw money in a vault and they don't actually know what the strategy is from that vault? Like they don't even know what they're trying to accomplish. It could be a terrible strategy and you might not necessarily understand it. So the term managed

31:55describes who makes the decisions. It does not establish that that the decisions are good. And you've got to make that distinction. So between between who's managing the vault and also what the financial strategy of that vault is, those are two very important things to understand before you put money in a vault. But let's be honest, most people are like, I don't have time. It says I'll make,

32:22you know, 12% yield. Uh they do the math real quick on how much money, don't understand any of the key concepts, and they throw money into something that goes for liquidity pools. You have impermanent loss, you have vaults, you obviously have liquidations and things like that that can go along with it. There's a lot to it, right? So, vault control map, right? You have the owner appoints key roles. You have the curator chooses risk configuration

32:51or strategy you could say. Allocators moves capital within the limits and sentinel specified defensive actions to try to keep everything running smoothly. Time locks can delay risk increasing curator changes. So let's go into it. The curator chooses the risk setup configuration. The allocator moves capital within approved limits. The scentil can take specified defensive actions if needed. And the owner appoints key roles. Appointed

33:25authority still matters. Do they have emergency authority? All these things are highly important and sometimes can be a little difficult to get the information on if you've ever tried to look for it. [clears throat] They've gotten a lot better than they used to be. A lot of these big products like Morpho, it's probably very clearly spelled out for you somewhere, but it's like a rules and terms agreement kind of thing where you have to really read it

33:49and actually know what the heck it's talking about. So, most risk increasing curator action use configurable time logs. Waiting periods before submitted changes can execute, giving, I guess, people time to be updated and time to make moves. Diversification test. Three markets sharing the same collateral issuer or price feed may represent three allocations but one major fail point because they all go back to maybe the

34:20price feed or something of that or the collateral issuer. They are what we call centralized points of failure. So caps limit exposure to dependency. They do not remove it. Now remember everybody that repetition is the father of learning, right? And repetition is the mother of experience, right? Of wisdom. So sometimes you got to hear these things a few times. The whole series this week is going to be about yield. So lock in.

34:52Let's raise that crypto IQ. Let me take a sip of some coffee. There's a lot of reading going on here. and let's try to understand what probably is coming across as quite complex. So again, vault control map, right? Inspect the actual vault configuration. And I assume here's a little trick. If you feel like you don't understand stuff, you could probably take the configuration and go throw it into

35:20Chappie, GBT, Claude, some kind of somewhere and have them at least break it down and make it simple for you. use the resources and tools that you have versus just throwing your hands up in the air and doing nothing because you feel like you don't understand. So, permitted sources, concentration, change authority, notice periods, and withdrawal restrictions all have to be inspected before you throw your money into something. Or if you don't and it

35:48turns out poorly, you didn't really do your due diligence. or if you're like me, I kind of stay away from some of this stuff, but that's my personal choice. I'm not going to use it as a reason not to talk about Morpho or raise my crypto IQ. So, a professional title is not a substitute for a risk policy adoption and scale. So, now we're getting into some of the categories that we break down to score this thing with. So, October 5th, which is today, total

36:14value locked about 11.4 billion for Morpho. value held in protocol contracts under DeFi Lama's combined methodology, right? So, you are getting numbers that have to do with the methodology of Defi Llama. Just remember that not revenue and not a guarantee of immediate withdrawal liquidity. Active loan approximately 5.5 billion in active loans. Outstanding borrowing showing capital being used for financing. TVL changed

36:4717% to the upside over the last 30 days. Not surprise. People probably trying to take loans at the bottom of the market and double triple up on whatever they're doing, whatever their strategy is. So growth in reported dollar value is not proof that every dollar is a new external deposit. Interpretation strong product adoption for sure. You have 5.5 billion [music] in in loans right now. that says people are using this thing. What are the

37:16limits though? Asset prices, collateral accounting, and repeated capital use can influence aggregate figures. And we see this a lot with some other metrics, things like circulating supply and stuff. Depending on where you go, this is coming from DeFi Lama. Sometimes you'll go to say Coin Market Cap and Coin Gecko and get different numbers for a circulating supply. So understand anywhere that you're looking at numbers this is a this is a high

37:43crypto IQ understanding wherever you're looking at numbers if it's highly important to you say you have a lot what to you is a lot of money you might want to go look at how they come up with those numbers versus another place and how they come up with those numbers before you assume that every number you read is 100% accurate circulating supply and max supply but mostly circulating ly definitely something that you want to look at if

38:11it's if you got a lot of money. It's all about stake, right? If I got $10 in a in a Morpho loan, I don't really care. Be honest with you. $10. What do you do? Uh but if I have $100,000, I might want to find out if the numbers I'm looking at are accurate in how they're put together. Anyways, that is definitely a little bit intricate, right? So deposits, loans, unique customers and token demand are not interchangeable. They are different

38:43things. Fees and revenue. So in every token autopsy, we do start talking about revenue, chain revenue, things like that. Kind of like how last week we did stable coin rails and we learned, wow, there is a ton of money volume that's moved around. But the nature of stable coins is to be highly competitive, which means cheap as far as transactions go and fees, which means for stable coin rails I'm talking about last week, we really dialed in how

39:19much money they don't really make, right, per revenue for the chain itself to then somehow pass on to the token. This is why these token autopsies, I'm going to rant for two seconds here. This is why these token autopsies are so important because there are so many things that have to go right in order for your token to acrue value from the ecosystem that it's associated with. What does that remind you of? It reminds me of altcoin season, right? Because in

39:50the same way, altcoin season requires a lot of the most perfect dynamics, right? Bitcoin has to pump. Its price has to go sideways or hold up, not not fall, right? And then money can circulate into Ethereum and then it can go into the the the higher altcoins under Ethereum, right? And then medium altcoins, small altcoins, extremely low altcoins. And if at any point in that process, [music] Bitcoin does something crazy like drop 10,000 or 5,000 or 3,000, it scares

40:23everybody. Everybody pulls the liquidity and we start all over. That's what we saw pretty much for the entire year of 2025. So, this is just food for thought. Super definitely a side salad here and what we're talking about, but I think it's relevant and understanding the dynamics that are necessary for a token to really pump. There's a lot of things that have to go perfect, almost perfect, right? [music] And think about what they did in 2025. How easy by what I just

40:51told you about what you need in capital circulation, right? >> [music] >> or rotation is a better word than than circulation, right? The capital has to rotate from Bitcoin, Ethereum, high alts, medium alts, low alts, high-risk alts to get down to those little coins that you're hoping, you [music] know, your meme coin turns into a dollar from 0.00001. This is important because in 2025, it

41:16seemed like all they had to do was mess with the price of Bitcoin and they killed altcoin season for the entire year. Every time it looked like we were about to get to it. Anyways, to back off of that, are we going to find the same thing with tokens associated with yieldbearing financial products? Are they going to be the same way or do they generate significantly more revenue for the chain than does stable coin rails? That's the

41:43ultimate point that I was getting at. Sorry for the rant. So user fees here 19.9 million protocol revenue zero token holder revenue also zero 30 days separate measures not parts of one pie where do you think those fees are going? What is the main thing in a lending? Right? In order to lend money, somebody has to put up collateral. Who do you think's getting

42:15paid? The [clears throat] people putting up collateral because they took all the risk. I feel like the people putting up collateral have all the risk, right? If anything goes wrong, if Oracle data feed fails, they could be out a bunch of money. So 30-day fees approximately, let's call it 20 million, 19.98. That's practically 20 million. But protocol revenue is zero. And token token holder revenue is zero. I definitely need to sip this coffee. These are figures

42:42reported by Defi Llama under their methodology. So, we come back to this methodology thing. Although, I wouldn't doubt that this is probably pretty accurate. And is it really zero? Is it $5, $10? If it's anything under $1,000 out of 20 million, it might as well just be zero. So there are separate measures not additive slices of a pie. Blues remember that is a product fee measure includes borrowers interest and

43:20liquid liquidators liquidators sorry bonuses here. So when people get liquidated, these people get bonuses, right? And all of that is included in that quote unquote revenue. [music] And now you can see why they're probably not making anything as a chain because they're paying everybody involved. Another thing to point out here, and this goes with every token, is who promised you that so and so token is going to do well because the products

43:50are used. Again, this is a lending and borrowing protocol. Who said that it was ever designed in a way where value would flow into the token? Who promised you that? If you bought Morpho, if you bought, if you bought any of these different coins, a lot of times we're the ones who assumed, who jumped to a conclusion that the token itself would increase in value because these products are used heavily. If it's not

44:21designed that way, then it's probably not going to be the case. So, midnight counts the fixed rate discount at execution. Fees and revenue. The combined fee total is therefore not simply Morpho's cash profit collected during a period. Curators and distributors can earn separately through configured vault fees and commercial arrangement. Their income is not automatically revenue belonging to the Morpho token.

44:52So a functioning ecosystem can pay several participants while leaving the governance token direct payout case unresolved. And remember [music] it's a governance token. Why would you make money for just being a part of governance? The governance would have to decide to pay the token. That's another person in the way from economic revenue DAO or governance however it's set up it can be different per company per product per

45:25project to actually making money in the token. So Morpho is a governance token. Let's talk about Morpho token and its utility. Utility think about utility is what does it actually do? So what does the Morpho token actually do? Well first and foremost governance token. And if I haven't said that enough times in the last 30 seconds, holders or delegates participate in decision-m about the network. There can be some

45:53decision-making power there, but it's usually going to get concentrated by people with a lot of money depending on the way that they distribute voting rights inside of that governance. A typical lender using USDC or borrowing against collateral does not need to purchase Morpho. Gas fee is not a utility of morpho merely to use those core lending functions. So they could use USDC they don't need to hold morpho token demand requires a separate

46:24explanation from borrowers demand possible motivations include governance influence strategic ownership and expectation of future economics. These are motivations not guaranteed cash flow. And so what I'm really getting from this already is that if you were to deal with Morpho in some kind of way, you'd probably want to be somebody supplying collateral or something and making interest because all the revenue

46:53is going towards the people participating in making this financial product work, not the people holding the governance token. So again token utility product demand someone wants a loan or yieldbearing position token demand someone wants more foes actual rights or exposure to a future outcome. Growth in the first does not mechanically produce equal growth in the second. Now where could this get a little bit wishy-washy? Right? What if a

47:32certain large institution who has a lot of money tied up in Morpho decides they want to buy a large amount of the supply so that they have a lot of say in what does and doesn't happen inside the governance that could cause the token to pump. So, I'm not saying that there's no way a token could pump because just regular everyday speculation, people buying can make it go up in market cap, but that's not going to be dramatic. Now, if an

48:03institution comes in and says, "Hey, Morphos, it this is, you know, this is all theoretical, but let's say an institution like Black Rockck says Morpho is going to be one of the top three DeFi lending protocols. Everything's going uh decentralized. We want to own a huge stake in it." and they buy as much of the supply as they can, that's going to pump your token. All right, that's just facts. How much it's going to pump it, I don't know.

48:28That depends on how many coins are in the market and how much they're looking to buy. But I'm not trying to say that just regular speculation and run-of-the-mill, somebody who wants to have a lot of governance, right, can't help pump your token. But that's secondary to a constant flow of value. A constant flow of value into a token. And then you have buybacks and burns and stuff is another great uh deflationary mechanism. So compatibility

48:59versus entitlement. And we're talking about Morpho. If you're just rolling in, smash that like button. So blue which is a product governance can attract a fee on borrower interest capped at about 25%. And choose the recipient. It also controls treasury morpho and the upgradable token contract. Official documentation warns that governance decisions need not confer an individual benefit on each holder.

49:31Midnight uses different fee mechanisms. a taker paid settlement fee and a continuing fee on lender credit. Blue's 25% cap does not apply to Morpho. Keep four steps separate. Contract compatibility approved and implemented policy. Actual revenue collection and a mechanism benefiting the token. Collected revenue could fund development or a treasury instead of individual holders. A fee switch is optional. It's not a dividend

50:07that forgot to arrive. Tokconomics and supply. Let's get into this. There's about 700 million circulating out of a 1 billion max supply, leaving about 300 million tokens not yet emitted, not yet [music] out into the supply. So 70% classified as circulating. The remainder is not a claim that the tokens will unlock tomorrow. As far as I know right this moment, I don't know when those 300 million are coming out. So rounded

50:37market snapshot approximately 2.68 million. Cost of one unit, not the entire network valuation. Circulating supply approximately 700 Morpho as we went over. The provider's estimate of a token considered circulating 1 billion max supply. That is the publish cap, right? That is the ceiling in which you can get to in the amount of tokens inside the product or ecosystem. So fully diluted value about 2.6 billion price applied to the full billion token

51:10supply not a forecast. So you'll see that after like everything that I say we have [music] a breakdown of what that means. This is a forecasted right not what it is right this second approximately 70% of maximum supply is classified as circulating the other rough 30% is not automatically unlocking tomorrow right so you you don't have to necessarily go running for the hills if there are a lot of tokens in a project to be unlocked and to be completely fair

51:42morpho launched in 2024 I believe more towards the end of it if I remember correctly And so with a newer project, you're going to see more tokens to come out. Actually, 30% on a newer project is really not that bad. Just depends on who's in charge and when those coins are going to come out. So TAI supply changes to actual schedules and recipients. Hopefully somewhere they have published their emission schedule. A fixed maximum

52:12does not eliminate dilution of a circulating float allocation investing. This is the information we really need to combine with what we were just talking about. So November 7th, 2024, that seems like the genesis date of Morpho the token. Governance and treasury 35%. Strategic partners 27.5% founders got 15.2 2 in other categories 21.9. This is historical allocation, not the

52:45current ownership consensus. This is where we started, right? And it's just regoing over the numbers here again. So, publish vesting schedule extend into 2027 and 2028 for certain cohorts. These are historical allocations, not a current beneficial ownership consensus. map, current beneficiaries, transferable balances, delegates, and scheduled releases. Several wallets can belong to one organization. We talk about this concept

53:17all the time. A custodial wallet can represent many holders, thousands, right? If not more. Unlock creates transferability, not proof of immediate selling you want to look at. So if you see an unlocking schedule, hopefully there's some transparency around where it's going. So say they say 100 million tokens are being unlocked tomorrow. This is totally hypothetical. Don't get me wrong, it's hypothetical.

53:45And say 90% of that is going to the core team. If the core team believes in what they're doing and they're looking at right here, right now, and they're like, "Hey, we're about to walk into a bull market in the next couple of years, they might not have a lot of interest in selling those tokens." Where if 90% of it or a large amount, right, is going to other parties, uh, people who were paid for giving

54:11advice and sitting on a board, they might sell money going to venture capitalists, right? They bought real early. Their tokens finally get unlocked. they're up 100x, 50x, 30x, they have a lot of incentive to sell where somebody who's directly ti tied to the company might want to hold if they believe in what they're doing. It's kind of up in the air, but it does help a little bit to see how much of the tokens are going where and who they're going to

54:38and how they may feel about their tokens that they're getting. It is completely a game of speculation though. So unlocks create transferability, not proof of immediate selling. And recipient incentive and market liquidity determine why that transferability matters. Shrugart says 111. Thank you for letting me know you are still here. You know I appreciate that. It's got to be why you always do that. Thank you very much. Who else is here? Who else is

55:05in the chat? Again, I know this is a lot of uh a lot of uh financial type speak, but how can you learn if you don't try? Morphos Association supports development, security, adoption, and documentation. Governance and vault operators have different responsibilities. A curator is not simply the Morpho team. And another thing I want to say is a lot of times things you learn like we learned a lot just today about vaults. That's going to

55:36transfer. That's not something that's only going to be valuable to you in Morpho. Vaults are everywhere. Same thing with things like liquidity pools and stuff like that. A lot of this crypto IQ raising sauce will serve you in many, many different applications. And that edge of understanding might be the difference between you going all in on a horrible idea or actually hitting the button and going all in on a great idea. Right? We can only operate at the

56:05level of understanding that we have. So governance and execution judge execution through deployed products. Usable integration, transparent changes and performance under stressed. These decentralization control maps include core contract mutability, upgradeable token and peripheral components, fee authority and vault role appointments, governance execution. The map differs by product and vault.

56:36Calling the whole stack decentralized skips the important nouns, right, or points. Our assessment morpho strongest potential and we're talking about competitive moat now. So we moved on to a new category. The word moat means ability to fend off your competitors, right? So how competitive is their moat against their competitors, right? It's like double competition. Anyways, Morpho's strongest potential moat combines liquidity, reusable

57:04infrastructure, risk curator, relationships, and application distribution. Another way to think of moat is what does a product, project, company, whatever, because this applies pretty much anywhere in business. What do they have that you can't easily copy? Relationships, um what else? Uh networks, right? Relationships and things in their products that you can't

57:36easily get. Like let's say you're a an exchange and you have direct relations with the United States Treasury like Kraken is if if you're a competitor to them and you don't have that and I don't think anybody else does. If they do it's just Coinbase and Kraken but I think it's at this point it's just Kraken. Well then that's a competitive moat. Your competitors are not just going to overnight get that hopefully, right? At

58:04least you would know in advance because they would have to put in an application. There's a long thing I want to go into [music] about competitive mode, but I'm not going to do that. Let's stick to Morpho. So, competitive mode, copying open-source ideas is easier than reproducing all the relationships that go with it. Meaning if you were somebody else, you're coming into the space as a borrowing lending decentralized platform and you went to

58:25the vaults of Morpho and other competitors and you looked at the strategies the vaults are using and stuff, that is something you could probably easily copy, especially with AI, but the partners and relationships behind maybe some of the large producers of capital, that's much more difficult. convincing people with lots of money or institutions, maybe Black Rockck or something like that, to put a hundred

58:52million or a billion dollars into liquidity because it's going to benefit them. That might be much more difficult to do without the appropriate time and things to show in relationship that's been built. So the practical competitive test is whether applications or capital providers could switch to a eural another lending venue or private credit if net term is approved. This is something that kind of goes hand inhand what we looked at in the stable coin

59:20yield. Right? When it comes to moving money around, especially if you're moving a lot of money around, you really just want to know who's going to move it efficiently probably first. effective and efficiently number one and then cheapest number two. And sometimes that cheapest might even creep into a hard number one. So my point here is stable coin rails are so cheap because they're highly competitive because if somebody else gives a cheaper rate, a bigger

59:51benefit, the more amount of money you're moving around, the more that that that cheaperness is saving you a lot more money. Right? If you're moving $10, it doesn't really matter if it's 90 cents on one platform and 85 cents on another platform as a fee to move it. But if you're moving $100 million and the fee slides and scales with that, well then it matters a lot to you. The point that I'm trying to make before I go too far off the rails is that

1:00:22can somebody else provide incentive that causes a disruption in [music] a market or in an ecosystem and that value moves somewhere else. So we saw that Tron is really the number one stable coin rails in decentralization to the tune of about 98 billion circulating where like its second competi competitor was like $3 billion, right? Polygon. So that's a good thing to say like Polygon could just offer something incentive. It could

1:00:56cut the fee in half. I mean, it would be almost nothing, [music] but I bet a lot of people would move over there. Same thing here when it comes to lending. So, the amount of interest that you have to pay back on a loan, it's kind of like the fee on a stable coin rail. If other products say, "Hey, we'll you know, say," and then this is all hypothetical. Say Morpho charges you 6%. Interest on your loan, and another person says, "Hey, we'll charge you two two and a

1:01:25half. who are you going to take a loan out with? It's it's a no-brainer. [music] And if you're looking for a loan, just like in the regular traditional markets, if you're looking for a loan, you're not married to an institution, you don't care about the bank. If one bank will give you a loan for 5% and the other bank will give it to you for 2%, it's a no-brainer decision which loan you're going to go into.

1:01:49And that what that's what makes it so hard to have a competitive moat because you really have to have something in these financial markets that people will stick with you. Moat strengths here for Morpho. Reliable execution and risk transparency, deep capital in relevant markets. Deep capital [music] is one of those things that matters to high- netw worth people that you can't just make happen again somewhere else just because you want to launch some code on chain

1:02:18somewhere. Welcome in, Melissa. I appreciate you coming in to the chat. Uh, I hope your day went well. I hope you're off work. Hopefully, you're headed home or something like that. Everybody, shout out Melissa, our wonderful mod, and thank her for being here and the many things that she does for this channel. And, as I said, I spend a lot more money on this channel than I ever make. So, consider those uh subscriptions because

1:02:42that helps me do what I'm doing and keep it going. I spend a lot more on the different things to come up with this information and present it to you than I make on the channel. I'm not complaining, but your support is super important to me. And I say that because Melissa shows up every day and helps out and does what she does. And I'm not paying her to do that. I would love to. For the record, I'd love to be able to do that. And in the future, I absolutely

1:03:06will. But just shout her out and thank her for all that she does, please. So useful integration that remains that retains user, right? Competitive mode for morpho. Let's let's let's reset here. So useful integration that re that retains users, right? Whoops, I went ahead. All right. Uh curators and operators would demonstrated judgment. Highly important, right? You could copy liquidity. You could copy things, but the people who

1:03:34actually operate the network, [music] one network could be solid with good people making good decisions and the other one could be terrible [music] and all over the place. People will quickly realize that as they get burned and they will go somewhere where they feel more confident. There are many ways to have a competitive moat against your competitors. Where are they weak though? Well, commodity infrastructure and easy [music] migration to other platforms,

1:03:58reward dependent deposits. We talk about the the reward dependency of most crypto projects, right? Safety incidents involving important integration monetization that materially worsens users economics. Low protocol fee can support distribution while deferring token monetization as we've talked about. Product competitiveness and token capture can pull in different directions. Morphos documents, audits,

1:04:29formal verification, and fuzzing in other testing. She says she is on the on the train ride home. You be careful. Hold your breath. I know the other day you were saying that they were smoking all kinds of things in that train. You don't want to get no contact. All right. So, security and control, we're moving along to from competitive mode. These are meaningful defenses, not certifications of financial safety or

1:04:57even strategy. Code risk, contract or integration malfunction, that kind of code risk is in everything pretty much that's on the internet or definitely smart contracts, right? Which is basically all of decentralization if you catch my drift. Market risk, collateral, price feeds or liquidation, liquidity fails despite correctly operating code. So the code can work perfectly and things like price feeds and collateral can get you. So right there there's two

1:05:28very important risks. One risk is code risk just right off the bat which you have code in everything digitally. So there's code risk all over the place. So you want to see audits and audits, right? So with an audit you have whatever was built at the time that they audit it. So if there was an audit of the code a year ago on any project and then you're a year later and they've integrated and done all these different things, well has that addition

1:05:59has any of that been audited? You the audits almost have to continue going. That's why AI auditing is actually pretty cool because AI could kind of continually monitor and audit things and keep the audits up to date. That would be very good for people who are speculating in the market. control risk governance vault roles right who's in control adapters and gates affect outcome blue the product isolates isolation right limits some crossmarket

1:06:29exposure so blue as a product is kind of limiting some of what's going on in the market to different sectors to help you to not be affected if things go wrong in other places I think that's pretty cool shared dependencies can still transmit stress and an immune suitable mistake is still a mistake. Let's see. Melissa says, "I enjoy being a mod. Respect my authority." That's hilarious. The train

1:06:57is good tonight. All right. I'm glad to hear that. We We don't want you riding home in unsafe conditions. Uh pretty sure flying cars coming soon. No, I'm just joking. But we all hope so. I saw that they had some kind of flying uh motorcycles that were going into manufacture. I don't know why I thought of you on that because I know you ride your scooter. So, audits reduce uncertainty. They do not abolish it. Liquidity and bad debt, you have to talk

1:07:23about this when you talk about something is entrenched in finances as a borrowing and lending protocol. So, withdrawal liquidity means assets are actually available to return, not merely an attractive account balance. If collateral falls faster than liquid liquidators close debt, affected lenders can suffer losses. If most loan assets are borrowed, ordinary withdrawals can be constrained.

1:07:51Stress consequences. So, collateral drops. Positions become unhealthy. Liquidators need execution liquidity. Delayed or unprofitable liquidations can leave a shortfall. Even the you know the collector here can come into quite some risk. Important variables collateral quality oracle behavior liquidation threshold market depth and response speed. High utilization is not automatically bad. This is one of the things that I really think about a lot

1:08:26when it comes to this type of stuff is just when you go into a bare market. What does that do for positions? because the collateral usable liquidity it all becomes a problem. You got to think if the liquidity that's put up in a in these places, not just the borrower, but the lender, if that is not in a stable coin, it's pretty much in any other asset in crypto, it's going to go down in a bare market. I mean, if you don't know that,

1:08:56you haven't been here very long. And that seems highly problematic on both sides of the field from the borrower paying back their debt to get their original collateral back and then on the contributor side, right? Them trying to put stuff up and there not being liquidity because the value of things has shrunk. Seems like stable coins make more sense than a basket of crypto assets. It also does not promise instant redemption. Capital cannot be

1:09:24fully loaned out and simultaneously waiting untouched for every lender. There are some limitations here. Vault exit. So, let's talk about how you would exit a vault. So, Vault B2 supports mechanisms for existing Sorry, no, that's not what it says. For exiting into underlying positions when ordinary liquidity is unavailable. And if you ever want to know what it's like, uh, go live and talk on the internet for two hours. I

1:09:54it's a good experiment and uh how you stand up. You know how like in school they call on somebody to read out loud and that was in front of like what 20 other kids and a teacher doing it live on the internet's fun. You you learn not to freeze up I guess. Anyways, or not to take it too seriously when you mess up. Shout out to all my undergrounders. Smash that like button. An underlying position. This is vault exits. An underlying position is not

1:10:21immediately spendable. USDC practical execution and cost still matter. Optional gate restriction restrict auctions. Right? So optional gates restrict actions as I'm talking about messing up reading live. A fee wrapper is an additional vault layer over an existing vault that lets distributors change its own fees. It can inherit underlying vault constraints even when its own settings look permissive. Inspect the entire

1:10:56route, not only the initial deposit page. You It sounds like just like anything, you really got to understand what the heck is going on. And I'm telling you, if you wait, this is not financial advice. This is common sense. If you wait till you see what you think is some kind of great opportunity and you're like, "Oh, I could get I could just take a loan, lock up my collateral that's going to do really well cuz it's in an asset that's appreciating and then

1:11:25I'm going to borrow it and go do this slightly more risky thing with it." You know, you might want to understand what you're doing. If you wait till that moment to try to understand borrowing and lending in a decentralized nature, it's not going to be as good as if you took the time to understand it beforehand. And that's really everything everywhere in a nutshell, right? Non-custodial concerns control and

1:11:54ownership. It does not independently establish cash access, timing or unrestricted access in a particular configuration. Treasury sustainability. So now we get into the treasury. Separate protocol revenue, service income, incentives, treasury assets, and external funding, right? That's all treasury related stuff. A treasury's own tokens are not equivalent to the same quoted value in cash. Selling depends on market depth

1:12:25and can create supply pressure. No runaway estimate is assigned without verified liquid balances, liabilities and operating expenses. Sus sustainability means funding, deployment and security without mistaking token distribution for earned revenue and you know depth of market and things thin liquidity stuff like that. You'll find out why a lot of the big players prefer Bitcoin and maybe Ethereum, slightly less, maybe XRP, but they don't

1:13:03play with meme coins for a reason because the liquidity to move 10 million, $100 million is just not there 99% of the time. Even if the market cap says there's 100 million or 200 million, the liquidity to actually withdraw might not be there. So, if incentives attract deposits, examine retention after incentive decline, and I totally understand if you don't go deep into this if you don't plan on using it. I do because for some reason, I want to know

1:13:30everything about crypto. Uh, that's me trying to raise my crypto IQ, right? So, paying people to arrive is not proof they will stay. So, if you offer incentives to get people there, that is not proof that they will be there. And what a lot of times they'll do is they'll offer an incentive. People will show up. They'll count the heads in the room digitally hypothetically and they'll say, "Look how many people we have here. Look how many users we have."

1:13:56The minute that that incentive or reward goes away, those people disappear like 99% of them. How many people stay is retention. And that will tell you a lot about how much the market, which is overall everybody, values a product when they're willing to show up and use it rather for free without a reward or pay a little bit of something. If a lot of people stay, they have a great product. That is just something that you should lock in there because when you see that

1:14:29with a product they get rid of their reward and a month later they still have like you know 20% of the users they had with the reward that's a good product and people value it. So valuation discipline large protocol total value lock does not automatically make the token market cap cheap. Total value lock belongs to depositors and collateral owners subject to their positions. It is not distributable equity owned by Morpho

1:14:59holders. And I think a lot of people make the mistake of interchanging those numbers. Dividing token valuation by gross economic fees and calling it price to earning ratio is very misleading. Hence a lot of the headlines you will see in the bull market. Interest paid to capital providers is not automatically token earning. With no current holder revenue stream reported, a cash flow thesis depends on future changes. And if you've been around crypto, things can

1:15:30change incredibly quick. This does not prove the token has no value though, right? Cuz we're talking about not going crazy in one direction, but that's not to turn around and go crazy to the other extreme where it just has no value. Now there is somewhere in the middle kind of like these token autopsies where we try to be as fair and in the middle of transparency and [music] uh there's another good word that I can't think of right now but it means to be in the

1:15:56middle and not on one extreme or the other. So valuation discipline it requires explicitly valuing governance future capture execution and uncertainty rather than renaming them current profits. catalysts and proof. Well, midnight adoption is certainly a catalyst. More completed fixedterm financing strengthens the product case. More people using it. Launch alone does not prove sustained use. So, you see a

1:16:29headline that says Midnight is integrated into Morpho. All right, that doesn't prove anything. You you kind of want to give it a little bit of time unless you want to use the product, right? But if you're just betting on it from like a token perspective or something, you need to know a lot more or wait to see how many people actually use it. Application distribution, retained users, and productive loans matter more than a long-term logo row.

1:16:57Vault improvements, risk controls matter when configured and used, not merely documented. So just because they have risk controls that are documented doesn't mean that the right people are in the right place in a timely manner using those controls to manage risk. Economic changes a credible catalyst requires affected markets fee details recipients funded mechanism and actual collections. Supply progress. Clearer recipient

1:17:27information and remaining schedules reduce uncertainty without eliminating supply pressure. An announced catalyst is a research lead, right? It's leading you to do some research. A completed catalyst is evidence. So bull, base, and bear, right? So base is in the middle. A bull and bear. You don't hear that term a lot, but we're going to use it a lot here. So the bull durable infrastructure sound risk performance and clarified

1:17:59token economics base working growing product governance token priced partly on future options bare incentive sensitive compressed economics and risk events or unsolved capture with the bull we got more becomes durable lending infrastructure this is looking out into the future I distribution expands, risk performance remains sound, and implementated mechanisms clarify Morpho's economic role in all of the economy of Morpho.

1:18:33The token usable has real utility base or in the middle product continues working and growing while Morpho the token remains primarily governance exposure priced partly on future optional. This is it's the most middle of the road right base. Bear deposits prove incentive sensitive competitors compress economics and major risk events damage trust. We see major risk events happen all the time over all kinds of DeFi spaces or token

1:19:07monetization remains unsolved while more supply becomes transferable. These are scenarios, not probabilities or price targets. We're just putting everything on the table so you can see it. The bull case needs product execution and token economics. Providing one leaves half the argument unfinished flags and open evidence. Things of particular note, right? Green flags, the opposite of red flags. Y'all talking about dating out there. Y'all know what

1:19:39a red flag is. Okay. What is a green flag? So recognizable borrowing and allocation problems are addressed. That would be a green flag. Risk settings and payment routes are inspectable, auditable and distribution reaches beyond specified or specialist DeFi interfaces. Architecture supports differentiated risk management. Very technical, I know. [music] Red flags to monitor. These are the things you want to look for. Gross

1:20:09interest presents as token income. If you see that, run for the hills. That's pretty much any product. Yield promoted without fees. So, how much they've made in yield without talking about how much of it is fee revenue. That's a problem. Reward components or withdrawal conditions and shared dependencies disguised as diversification. Fee policy nar narratives without implementation. Evidence still needed

1:20:39here. Durable retention after incentives. current financial ownership and voting concentration, fee economics, accounting for user migration, a sustained verified connection from activity to Morpho holders, aka token value capture. Haven't seen any of it yet so far. These are not allegations that every risk has materialized. They are conditions preventing a stronger token verdict. Let's see.

1:21:17It threw this random thing in here that I was wanted in the notes, but I didn't really want it in the slides. It just seemed like a little bit too repetitive, right? So, let's get rid of this. Just blow through this real quick. So, net yield example, gross native yield, say it was $800. Performance fee 160. Management fee $100. Re assumed reward $200. Simplified net 7.4%. So simplified one-year illustration, not

1:21:55current vault offer. Ignore compounding price changes, taxes, transaction costs, and losses. $10,000 deposit is about 8% gross native yield produced. $800 off of 10 grand. So, three positions, three exposures. I'm just trying to skip through things that you're not going to be highly likely to want to hear. Sometimes we get into some heavy topics. It's going to be a week of that. We got four token autopsies. This was just the

1:22:33first one. can't guarantee that they'll all be the same level of detail as far as I guess if you're not used to this information. How much of it goes over your head? But there will be yield and lending financial product type of talk in all of it. Right? So, let's look at the scorecard. It gets a 68 out of 100. You need a 80 or above to pass the token autopsy. So, it's not a wonderful score,

1:23:06but I think it's just as important to know what tokens have a bad score as to what has a good score. So, let's talk about it. Utility and adoption is going to get a high score because people use it. But this is a token autopsy. Token value capture, a 6 out of 20. That is not a good score. Tokconomics and supply, a 9 out of 15. Kind of in the middle. Competitive mode, actually pretty high. Okay. But again, competitive mode is like utility and

1:23:34adoption doesn't really do much for the token. Security and decentralization 7 out of 10. Catalyst and execution is actually a 9 out of 10. It's a great score. And risk and unanswered questions is a 6 out of 10. Landing it a 68 out of 100. So, editorial research grade, not a price, target, probability, or buying recommendation. Higher risk category points means risks are better understood and resolved. and it goes back over kind of everything

1:24:04we just pointed out. [music] So with we're going to break down each one a little bit. So with utility and adoption, of course, it's useful finance and allocating infrastructure. That doesn't really seem like it needs to be explained, but capital size does not establish customer quality, retention, or incentive dependencies. That's why it doesn't have two points that it could have. All right, token value capture. This is

1:24:28one of the ones I really want to get into. So real governance authority and fee capabilities create possible future economic past, [music] but our token autopsies are always centered around what is true right here and now. We may tell you some things that are coming up or projected to happen, but we don't actually count those things inside of the score of the token autopsy because it wouldn't be fair. Things can take forever. They can get cancelled and just

1:24:54never happen. So it loses points because product actively does not demonstrate a direct holder revenue. Fee activation would still leave recipient and token benefit mechanisms completely unsolved. What would improve this? Well, implemented transparent sustained revenue to token economics, not more discussions of what could be switched on. Something like a buyback and burn or just a burn in some kind of mechanism. These things would be great for the

1:25:22token, but we're not seeing any direct relationship between Morpho the token and the economic value created. And honestly, most of the revenue is going to the people involved in making the product happen, aka the people putting up capital to be borrowed inside of this vaults or decentralized lending. None of that does anything for the token. I never come to try to put down or talk

1:25:54badly of any token, but we're going to be honest. All right. I don't see anything here that really screams the token is going to do well. Even if the product serves all kinds of huge metrics of numbers and grows, doesn't mean the token's going to grow much. I think your best case in this kind of example is what I said earlier. Somebody's involved with the actual product, a big financial institute, a bank, Black Rockck, a big hedge fund, something, and they try to

1:26:24go out and buy a ton of the token in order to have a bunch of governance, right? Because they have a large stake in what's going on because they have a bunch of money involved in the product. Other than that, I don't really know how you get a large amount of money into the market cap, especially in a quick period of time. Obviously, in a real bull market, altcoin season, you'll see everything go up at least a little bit, right? The rising tide lifts all ships.

1:26:51So, tokconomics and supply, it loses points. And I'm more focused on why there's not points here, right? Remaining non-irculation supply and historical concentration remains highly relevant. Old percentages do not establish the current control map, so we don't really know. Competitive moat actually earns pretty high. But why did it lose some points? Well, capital is mobile. It can move around. Competitors can improve terms

1:27:18and low fees do not automatically establish profitable token economics. You will hear me say a lot of the same things about the token autopsy. I just don't see anything more valuable to people in crypto than does money actually does value usually in the form of money at the end of the day, right? Get captured in the ecosystem and go to the token. It's one I love learning about the products, learning how they work, no matter if it's lending yield,

1:27:50you know, stable coin or anything else for that matter. But at the end of the day, if I'm going to put money in a token, it's got to capture some value in its ecosystem or have a mechanism that makes it more scarce. So, catalyst and execution loses some points for product delivery and token economic delivery remaining distinct. A successful launch does not settle capture risk and unanswered questions. It loses

1:28:19points for incentive durability. When the incentives are gone, how durable is the product? Current concentration, specific vault restriction, and future holder economic remains uncertain. Now, I don't really know what we are considering to be incentive, right? Because it seems to me in a lending protocol, the incentive is the profit for the people supplying the collateral to be borrowed, right? So, the interest rate 8% or

1:28:47whatever it is, that's actually really high, you know. Um, but anyways, and I don't know what the actual percentages are. That was just in our uh our little not a metaphor. Whatever the little mock settings that we had there, the right words not coming to my mind. It's been a long day. So, I don't know how that incentive would go away. It it could become smaller. So, if a lot of decentralized lending protocols decide they're all going to be highly

1:29:18competitive, they're going to move to three and 4%. Because markets change, that would be incentive, right? Maybe less people put up collateral. Maybe more people are like 4%. I could put my money in treasury and bond, which is probably a lot more or less volatile, I should say, a lot more secure. Uh, and so they lose the incentive to be in this product and not somewhere else. That could be

1:29:49there's always like five different rants that I want to go off on. We will cap that there. So, here is our leaderboard. We will be, I'm telling you guys, at 25 token autopsies in no time. So, first off, we have A, the only token that has passed the token autopsy report. You do with that information as you want. This is never financial advice. I won't tell you to buy anything or what to do with your money, but I'll certainly offer you education and of course, friendship. I

1:30:18consider this the underground crypto family. Join that Discord that should be linked in the description if I knew what I was doing. It is in the description, but it's not in the chat like it normally is, and that is my fault. Anyways, hey, you you live stream six days a week. Kind of mess up sometimes. Anyways, a the only one that's passed. We got Hyper at 77. And then we have a tie for third. I'm not going to read every single one

1:30:44of these, right? You can always pause and look at them if you want. We do have a tie for third at 76. And we might see other ties going on. I'm not sure how we're going to handle that, but that's not really important. Who's in third or who's in fifth is not really super important. It looks like even though it counts three twice, it still makes it four because it goes right to five. Anyways, that's probably the best way to deal with it. Um, really, who's in the

1:31:07top five to 10? Top five when we get to like 25 or the top 10 once we've done about 50 is probably what's most important here, but we'll still roll through it. We did pull, we did, we did Filecoin, XLM, Arbitum. The full videos are on my YouTube. Go find them. I will be aggregating all this information as soon as I can. Reliable J says, "Don't mute. Don't mute me, Melissa." Yeah, it's funny. Uh Morpho, that is for tonight. Got a 68.

1:31:39It is uh the second lowest score of anything, which is not to be surprised. Again, as I was talking about saying a lot of the same things, I really really feel so strongly about this. Nobody promised anybody that Morpho token was supposed to be this large value capture token that was supposed to go to the moon. Nobody said that. And why is that so important? Because honestly, it applies to

1:32:09so many tokens. There are so many tokens like Onondo. Ono is a great example. Everybody's ono this. Ono that. Buy some Onondo. Ono is going to be great. Ono the product is going to be fantastic. It's already proven tokenization of real world assets and things like that. It's done it. It's there. But what does that mean for the token? This this assuming I just really want to get this in your guys' mind. This assuming that

1:32:33the token associated with an ecosystem is going to do well is absolute nonsense. Like it's absolutely just something that we do by nature. I think some of it honestly comes from the stock world and old tradfi understanding of things because that share of a stock is supposed to be represented stake in a company therefore you are part of ownership in a company and therefore have some stake in revenue I guess I'm not real um I I don't

1:33:05consider myself an expert at all in the stock world although I know a little bit about it so I just want to say that let's not assume that every token is doing well because the product is doing well. And what happens is you hold it and in a bull market things go up and some things do crazy numbers. That connection to the token is a lot of times what gives the advantage. So the bull run happens and rising tide lifts all the

1:33:33boats. All the coins start to get some more money in their market cap aka your price of coin goes up. But the ones that do astronomical numbers, well, they probably have some kind of burn mechanism. They have some kind of relation to the token that [music] is putting that little icing on the cake to make it really pump. Just food for thought, right? So, we've done 17 so far. Again, we'll be at 25 in no time. So, Morpho is tonight's edition.

1:34:06Previously verified scores are carried forward, not silent. Really, not silently rescored. So, whatever we scored it at is its score until we do an update. They're not like constantly in the background being changed on you because that would probably make a huge mess out of things. Retain original verdict labels. These are grades from their respective reviews, not a current raking of anything they've done. So, if something like Avalanche was the first

1:34:31token autopsy we did, I believe if they came out with some crazy news tomorrow that changed the whole entire tokconomics, they're going to burn 90% of the supply. Um, I haven't obviously updated the score for that. If something crazy like that happen, we will do like an update show, but as of right now, uh, I can't keep track of all the coins all the time. That is a lot of work. The list includes prior entries whose scores are verified. In conclusion, Morpho

1:35:00earns respect as a product as a a as a product, not a token. It addresses real lending needs, provides usable infrastructure, and makes meaningful risk and allocation information visible. Morpho, the token, it needs its own argument, right? Let's just wrap this up. Net yield depends on fees, incentives, losses, and exit conditions. Future capture requires implementation before becoming current earnings. Tomorrow, giving it away.

1:35:31Tomorrow's Sky episode applies the same investigation to stable coin economics. So, we're going to be talking a kind of a we did stable coin rails. Sky kind of brings and merges those two conversations together. It's different plumbing, the same requirements to the token autopsy. Follow payments, not their actual recipient. And then we just get into kind of where we pulled everything from. At some point in the very near future, this will be, let's

1:36:02download it, available to everybody to look at. I got to organize it. It takes a lot of time and I don't actually have a lot of time on a normal day-to-day basis, but I will take a day one day and make all of that happen. So, join that Discord in the chat. Really go to the description cuz today I did not get the chance to do that. And follow me underground crypto over at Twitter X, whatever you want to call it.

1:36:34Uh, pin post is doing pretty well. 3.4,000 views. That is because I boosted it and paid some money. All right, very hard to grow on Twitter. Uh, all these social media platforms, I got I got a whole conspiracy built around it. But all of them suppress crypto content under the guise of fraud and spams, which are real that that is really happening out there. I get it. But, um, it's almost overboard how much they suppress reach and stuff

1:37:05like that. Anyways, it seems like now that we might be going into a bull market, they might be lifting this veil up a little bit on the heavy suppression because they're probably doing the bidding of a lot of wealthy investors and institutions. They suppressed it so it didn't get out of control and they could buy up large supplies and when they need it to be mainstream or big bull run, everybody's talking about it. your your uncle's calling you wants to

1:37:34know about that Bitcoin. Um it's because they let the that suppression go. Anyways, that's my theory. Do you have one? Anybody have a theory on why it is so absolutely hard to grow. Wow. Actually, the numbers have been worse than ever the last couple of days. Usually, they're pretty good. Anyways, I post a lot of very interesting stuff I feel like over here. And I really want to point out in our Discord, once you get over there,

1:38:03let me let me make sure the Discord's on the right thing. Yep. All right, let's go to the Discord real quick because I want to show I don't see a lot of people interacting with this um information that I'm posting in the Discord and I think that and I'm not posting it anywhere else. I think it's great information. There we go. So many things going on in the background here. So, if you go to the DeFi hangout, you will see tons of

1:38:30great news being posted here that has to do with DeFi, right? A stablecoin had a loophole and the Dow was paying for it. Where have you seen that story yet? Do you know that one yet? Until Saturday, you could borrow GHO on a core market at 4.2% and park that stake GH for 4.5%. You see the 0.25% 25% right right that you'd be up per token logic the Dow had to cover that spread a carry trade sponsored by the Treasury

1:39:06apparently they shut that down meanwhile the exit drawer ran dry the USDC's stability module one of GH's or Ghost main swap back the dollar it's empty the USDC one held about 22.5 million GH sat below 99 cents most of September. So the borrowing rate is now 4.5% matching the saving rate. Core debt barely flinched 116 million GH on October 2nd. So this type of uh and this is funny because it's so directed towards you know lending and stuff that

1:39:45we're actually talking about today and yield and stuff like that. But of course, if you like your DeFi gaming and stuff like that, AFK Heroes just landed handed out pickaxes for mining that don't exist yet. My point is, I'm posting a bunch of news over here if you care about some of this more niched news. This is news that you might find somewhere on Twitter, but most of the time these things go untalked about. And I wanted to make

1:40:16sure that in our Discord there was some kind of like exclusive news that um was a little more niched in than what you'd find in a lot of places. Obviously, if you go look up a you're going to find that, but like if you come down here to the sandbox stress tested its AI game factory before unlocking it to the lobby, unless you're following sandbox, you're probably not getting that. Anyways, the main hangout is where most of us would chat, right?

1:40:43Feel free to come check it out. join the underground family just a little bit deeper and get in that Discord. And let's get back to where we were. There it is. And of course, I post other news. I don't double post the same thing from X to the Discord, right? There is totally different news over here. Glad to see this pin post that I boosted is actually doing well. A lot of times I'll boost a post or try to boost a post in like an

1:41:17hour and then they'll they'll just stop it. So I'm always kind of looking to see what they're going to actually do. And it looks like they're letting this one run. So I like it. All right, guys. Hope everybody is having a good night. I hope you're having a good Monday. Mondays, I know, are rough for a lot of people, but we're going to still here do our due diligence and keep these token autopsies absolutely running.

1:41:45So, I will catch you tomorrow, 8:30 p.m. New York time. We'll be back. We're going to be talking about Sky. It used to be Maker Dow. I So many things to keep track of, but it does come back to my mind. Uh, Maker Dow has turned into Sky. We're going to do a token autopsy of it. See what's changed, what's new about Sky, what's the same old stuff from Maker Dow. [music] and stay underground, stay crypto, think

1:42:11long term, and I'll catch you in the next one. Shrugahart says, "Thanks again, Eugi. Good night, everyone." Thank you, Shruggart, for being here. And you're always here till the end. So, I think your crypto IQ is skyrocketing right now. Reliable Jay as well, letting me know that he's here to the very end. Thank you guys. It means the world to me. Let's continue to raise that crypto IQ, and I'll catch you in the next one tomorrow night, 8:30 p.m. Underground

1:42:34Crypto out.