Gauntlet, a prominent risk management firm in the decentralized finance (DeFi) sector, has made a strategic move by shifting its collaboration from Aave to Morpho. This decision comes shortly after Gauntlet parted ways with Aave, a leading DeFi lending protocol.
The partnership between Gauntlet and Morpho, announced on February 27, involves the creation of lending products on MorphoBlue, an innovative protocol that allows companies to establish their own lending and borrowing pools called “vaults.” Unlike traditional lending protocols, MorphoBlue empowers risk managers like Gauntlet to independently develop and oversee lending protocols, eliminating the need for external risk management advisors.
Gauntlet’s decision to sever ties with Aave was influenced by challenges encountered in navigating Aave’s decentralized autonomous organization (DAO) framework. John Morrow, Gauntlet’s co-founder and operating chief, highlighted these difficulties in a forum post on February 21. Morrow mentioned the inconsistent guidelines and unspoken objectives of major stakeholders within the AaveDAO as the primary reasons for their departure.
This unexpected rift occurred just two months after Gauntlet signed a significant one-year contract worth $1.6 million with AaveDAO, signaling a major shift in Gauntlet’s operational direction within the DeFi ecosystem.
In the wake of Gauntlet’s departure from Aave, speculation arose about their future partnerships. Morpho emerged as a suitable collaborator, providing clarity in the DeFi market landscape. Paul Frambot, co-founder of Morpho, emphasized the competitive stance of Morpho against Aave and Compound, highlighting Morpho’s Blue protocol as a direct rival to AaveV3 and CompoundV3. Frambot criticized Aave’s attempts to hinder Morpho’s growth through initiatives like the Merit reward program. He also emphasized Morpho’s commitment to transparent incentives and robust risk management mechanisms for its users.
Despite the growing presence of Morpho, Aave remains the dominant force in the DeFi lending arena, with over $9.3 billion in total value locked (TVL). In comparison, Morpho has $2.7 billion TVL, and Compound has $978 million, according to DefiLlama data.
In a subsequent statement, Frambot characterized Gauntlet’s departure from Aave as inevitable, citing misaligned incentives, scalability challenges in cash flow management, and the complexities of navigating political dynamics intertwined with complex mathematical models.