Morpho CEO: Vaults Are The Next 100x In Asset Management (Institutional Appeal)

**Robbie** (0:00)
Paul, welcome to the show.

**Paul Frambot** (0:01)
Hey, thanks for having me, guys.

**Andy** (0:03)
Good to see you, buddy. Big launch for midnight, big few months for Morpho, and the vault complex awareness as a concept, I feel like.
We kind of call it as part of our big four. We got stable coins, tokenization, perps and vaults. These are kind of exports of this industry that from the investor perspective, it seems like investing in these trends is like a multi-decade or at least a decade long kind of megatrend. There's a lot of opportunity for investors and then a lot of entrepreneurs coming in. Maybe just to start, Paul, give us kind of your lay of the land of these megatrends and perhaps a bit more focused on vaults and just generally what your current mental model is for why this is catching on right now and kind of what these exports are doing for the industry. Sure.

**Paul Frambot** (0:51)
I think in general, the realization of the last year or even the last six months as an industry is that crypto really isn't any more here as a speculation product, but more as infrastructure. Like everybody, we really made this switch from product to infrastructure for everybody, whether that's us as builders, but also fintechs, trust fund institutions, et cetera. Now it's like widely understood that moving to an open financial system on open rails is inevitable. It will happen. It will happen on blockchains. And in order to make this happen, you have a few primitives to your point.
Stable coins being the money, the payments, money movements, money transfers in general. And then with this, you have credit and vaults in general. And I like to think of vaults as just a way to package credit into a simple and usable form. But the true underlying primitive is really financing. And how do you have on-chain financing markets? What we've noticed over the last few months is that the market for crypto native loans is great. It's like a $50 billion market, but it's still very small compared to the entirety of credit.
And there is a lot of appetite for those people that are not here for the crypto speculation aspect of things, but are just here to upgrade their financial infrastructure that, okay, how do I unlock the $200 trillion market of credit and how do I bring it on-chain? And so that's like, for us, what I see as the biggest and most interesting opportunity, and is also the reason why we launched Midnight is to start to address this market.

**Robbie** (2:31)
Very cool. Obviously, I mean, the credit market as a whole is just absolutely massive. We're talking trillions and trillions of dollars. There's tons of innovations that are bringing institutions into the space and unlocking a lot of the capital efficiency that bringing this on-chain provides. Just curious, I mean, you guys have onboarded some of the biggest institutions in the space. I love the Morpho integration with Coinbase. It's kind of my de facto neo bank lending that I like to use.
Just curious about your experience working with some of these institutions with Coinbase. There's obviously integrations that kind of span far and wide, recent ones with other financial institutions. Just curious, what has that experience been like bringing them into the on-chain space? Why now?
What have you done to help bring them in and kind of help them understand the opportunity at stake here?

**Paul Frambot** (3:20)
Yeah, I guess we like to divide the type of institutions into, you have the distributors and you have the operators. The distributors are the fintechs of the world, the exchanges of the world that have a large consumer audience and want to offer those financial products that are on-chain and because they're better and more accessible. That's the case of Coinbase, of Robinhood, of Deal, of all those different partners that we help power earn services or loan services directly on-chain.
The reason they came on-chain in the first place is for one very simple reason, is the interest rate is so much better on-chain. The reason the interest rate is so much better on-chain is, it's an open infrastructure, so competition is much more fierce. You get access to global capital.
Coinbase lets you borrow on the back of your Bitcoin, and then on the other side of the book, like on the Morpho protocol, you have literally tens of thousands of lenders coming from all over the world, are here to compete, to provide you the best possible rate. This is not something that exists in Trezor and DeFi today, right? And so this is why those fintechs and those exchanges, those distribution platforms are interested, is because the pricing is better, the liquidity is better, and also because the system is all open, it's super easy to integrate. Like if you have a self-custodial wallet now, whether you have it in-house like Coinbase or you use a Privy, like the Robinhoods of the world, like you can just in one click get access to, if your user has a self-custodial wallet embedded, you have access to all the powers of the chain, and because everything is standardized, everything is open source, it's super easy for your developers to integrate. And that's the second benefit for those institutions. And then the operators of the market are more the traditional finance guys, the people that are going to develop those financial products offering. This is a more nascent set of institutional, but over the last six months, we've seen unprecedented interest and builds from those large financial institutions, and we can talk more about that.