[GP-9] Maximizing Borrower Value: Why the Move to Morpho Matters
Abstract
The Seamless protocol has grown from its origins into a dynamic ecosystem centered on borrowing, leverage, and accessibility. This proposal outlines a pivotal shift: migrating liquidity from the legacy platform to Morpho Vaults. This move optimizes borrower value and supports community expansion, aligning with Seamless’s vision of a streamlined, ‘platformless’ future.
Benefits of Migrating to Morpho Vaults
Morpho Vaults provide a permissionless, efficient platform that unlocks significant advantages for borrowers. Key benefits include:
- Significant Liquidity Growth: Morpho Vaults (supporting assets like USDC, sBTC, and WETH) have achieved $70M in Total Value Locked (TVL) within the past month, dwarfing the legacy platform’s $15M.
- Improved Borrower Access: With no permission barriers, Morpho enables broader participation, empowering more users to tap into borrowing opportunities.
- Cost Efficiency: Unlike the legacy platform, Morpho eliminates third-party service fees and resource-heavy overhead, making borrowing more affordable.
- Support for Innovation: Morpho paves the way for cutting-edge products, such as Leverage Tokens outlined in the 2025 Product Roadmap, offering borrowers greater flexibility.
Challenges of the Legacy Platform
The legacy Seamless platform, originally built on an AAVE V3 fork, fueled early success but now poses obstacles to progress. Its limitations include:
- High Fixed Costs: Monthly maintenance expenses of $29.8K USD (totaling $443.7K annually) burden core contributors and drain resources.
- Resource Demands: Engineering focus is consumed by upkeep rather than innovation, stalling development of new features.
- User Impact: These inefficiencies limit user yield opportunities and impose tighter borrow limits, reducing the platform’s competitiveness and appeal.
Sunsetting the legacy platform is a critical step to remove these constraints and refocus efforts on Morpho Vaults.
Proposal Summary
I propose a community vote to migrate liquidity from the legacy platform to Morpho Vaults and, over the next 2-3 months, sunset the legacy platform and ILM v1.0. This aligns with the protocol’s roadmap, freeing resources to prioritize a near-term launch of Leverage Tokens and realize the community’s vision. Here is the suggested plan:
- Snapshot Vote: Gauge community support for this migration plan, authorizing subsequent on-chain votes without additional discussion periods.
- Phased Sunset: Over 2-3 months, pause deposits, phase out rewards, and guide users to Morpho Vaults (for legacy liquidity) and Leverage Tokens (for ILM v1.0 users).
- Migration Bonus for ILM v1.0 Users: Since Leverage Tokens are not yet available but on the near-term horizon in the coming month or so, I suggest offering a migration bonus (potentially an airdrop) for loyal ILM v1.0 users who redeposit into Morpho Vaults until Leverage Tokens launch. The DAO can determine the details through discussion or a future vote.
- Consideration for Legacy Users: Morpho Vaults have excellent rewards and serve as a direct alternative for legacy platform users.
Goals and Objectives
- Resource Consolidation: Redirect engineering efforts and SEAM rewards to the protocol’s core mission of borrowing and leverage, emphasized by Leverage Tokens launching this/next quarter.
- Maximize DAO Value: Simplify operations, reduce fixed costs (e.g., third-party provider fees), and improve community outcomes.
- Ensure a Smooth Transition: Reward loyal users, especially ILM v1.0 users impacted by the sunset, through suitable incentives and clear communication.
Proposal Details
Here is a rough (draft) timeline for the migration and sunset process, spanning approximately ~3 months beginning mid-March 2025:
- Legacy Liquidity: Users will see UI banners encouraging withdrawal and redeposit into Morpho vaults (with a clickable link provided).
- ILM v1.0 Users: With Leverage Tokens (ILM v2.0) not yet live, I propose a migration bonus, such as an airdrop, for users who redeposit into Morpho vaults within 1 month of the proposal, should it be approved, with a random snapshot to be taken by DAO to inform rewards, until v2.0 is available. The DAO will refine these specifics through discussion or a future vote.
This timeline is flexible, aligning with approximate dates while offering users a clear transition path.
Technical Details
Smart Contract & Backend Actions
- GOVERNANCE: Prevent new deposits via
setReserveFreeze(asset, true); allow withdrawals. - GUARDIAN: Stop on-chain rewards with
setEmissionPerSecond(asset, 0). - GOVERNANCE: Disable reward emissions using Aave’s
RewardsController; later vote to clawback surplus SEAM rewards.