May 9, 2024: Risky Business 🦙💼
LlamaRisk launch lending markets on Morpho and Sturdy
Most risk managers are consummate critics. They’re great at sitting back and firing potshots, but aren’t exactly “doers.” That is, the couldn’t write production-worthy code themselves, nor play onchain to save their everlasting souls.
Yesterday, Llama Risk showed off again why they are truly the best in the business, releasing Morpho vaults for Convex-wrapped TriCrypto LPs
What is Morpho?
Morpho identifies itself as “a trustless and efficient lending primitive
with permissionless market creation.”
Launched in October, they’ve certainly found a niche. DeFi on Ethereum mainnet is meant to be dead, yet they’ve quickly grown to over $1.5B TVL in that time, landing them in 6th place overall for lending markets.
What’s their secret? Their white paper hones in on a niche: creating a permissionless lending primitive, without excessive reliance on DAOs to control parameters.
Their success has gained them some notable investors… or perhaps vice versa… either way, they boast quite a star-studded roster of backers.
For some more detail on Morpho, here’s a good thread:
Sturdy
It brings to mind another ascendant protocol with a similar mission. Sturdy Finance v2, launched just a few months ago, has been ascendant in a time when nobody’s supposedly using DeFi on Ethereum. The protocol soared quickly past $50MM TVL, where it’s sat for a couple months.
Showing there is life after a hack, Sturdy V1 was also seeing success, hitting $30MM TVL before a hack in June of 2023.
Using the learnings from this v1 offering, the team went back to the drawing board after the hack and worked to build something more ambitious, “a new primitive for lending.”
Sturdy identified that overly gatekept lending markets provided an opportunity. Per their Medium post:
“As a user, it should be entirely up to you how much risk you tolerate and what you’re willing to lend against. Today, this is not the case. When a protocol offers vaults with rigidly defined collateral types, they tell you how much risk you can take on.”
https://sturdyfinance.medium.com/introducing-sturdy-v2-4a0135aca675
You may be detecting a familiar theme from the Morpho White Paper above? It seems two different protocols saw the same opportunity at a similar time…
For more on Sturdy, we’ll refer you to their blog for further reading, because we now want to tie this back to the main character.
Llama Risk
As we highlighted above, most risk managers are critics, but couldn’t ship to save their souls.
Llama Risk is charting a very different course.
As part of their mission to support $crvUSD integrations, they’ve been hard at work this year actually launching new lending markets for the decentralized stablecoin.
Yesterday they announced the launch of a $crvUSD MetaMorpho vault.
The initial collateral in this case is a series of TriCrypto LP tokens staked in Convex.
Handling this is not a simple technical feat. It required:
A custom EMA oracle, Llama Lend style, to pair with a Chainlink oracle
Adjustments (courtesy C2tP) to the ConvexStakingWrapper
All of which were audited by Nomoi, and incentivized via both $CRV and $MORPHO.
It might seem like unusual behavior from a risk team to actually act as on-chain operators, except it’s the second such instance this year.
In February, Llama Risk did a similar task using Sturdy Finance in conjunction with their v2 launch:
This involved extensive forum discussions, eventually launching to our profile here:
February 6, 2024: Sturdy Finance 🧱💸
Last fall we highlighted Sturdy Finance v2 as a notable lending market that was building interesting integrations involving $crvUSD. Over the past few weeks the team has officially been rolling v2, and it’s a hit! About Sturdy Finance Before its untimely hack in June of 2023, Sturdy Finance v1 proved it was onto something big. Despite having no token, t…
Llama Risk would show them to be adept stewards, monitoring the performance and actively make adjustments over time.
Our takeaways:
Morpho Labs and Sturdy Finance demonstrate there's a real niche for lending markets with less DAO oversight
Llama Risk are not your typical risk providers.
It illustrates the Llama Risk team as a highly active and engaged team of operators and executors, getting their hands dirty, and willing to use any available onchain building blocks to [hopefully safely] execute their mission.