Gauntlet, a DeFi risk manager, forms alliance with Morpho shortly after severing ties with Aave.

Gauntlet, a decentralized finance (DeFi) risk management firm, has joined forces with Morpho, a DeFi lending protocol, shortly after its unexpected split from Aave. The partnership, announced on February 27th, involves Gauntlet creating its own lending products on MorphoBlue, a new protocol that allows companies to establish their own lending and borrowing pools known as “vaults.” Typically, lending protocols hire firms like Gauntlet to assist with risk management, but MorphoBlue will provide risk managers with the ability to create and oversee their own lending protocols. Unlike Aave, where lending pools are accountable to the AaveDAO, Morpho has a different approach to borrowing and lending. Gauntlet’s co-founder and operating chief, John Morrow, cited difficulties with navigating inconsistent guidelines and unspecified objectives of major stakeholders as the reason for the split from Aave. The partnership with Morpho clarifies Gauntlet’s next steps after parting ways with Aave, resolving the uncertainty among DeFi market observers. Morpho’s co-founder, Paul Frambot, criticized Aave, accusing the protocol of attempting to impede Morpho’s growth through the introduction of a reward program called Merit. Frambot outlined how Morpho plans to compete with Aave and Compound, two dominant firms in the DeFi lending sector. Morpho’s Blue protocol is seen as a direct rival to AaveV3 and CompoundV3, offering users more transparent incentives and risk management. Aave maintains its position as the market leader in DeFi lending, with over $9.3 billion in total value locked (TVL), while Morpho has $2.7 billion and $978 million locked, according to DefiLlama data. Frambot described Gauntlet’s separation from Aave as inevitable, citing misaligned incentives, scalability issues with cash flow, and the combination of politics and complex mathematics.