This SIP proposes integrating Hyperithm’s Morpho USDC Strategy into the USDC Mainnet – Lower Risk vault on Ethereum within the Lazy Summer Protocol.
After comprehensive technical review and thorough risk assessment, the Morpho USDC Strategy aligns with Lazy Summer’s standards for inclusion.
Morpho Hyperithm vault ensures consistently top-tier yields through its proprietary liquidity allocation algorithm, while maintaining safety via rigorous whitelisting market selection.
Integrating this strategy enhances Lazy Summer’s vault diversification, offering exposure to an additional institutional-grade Morpho lending strategy, distinct from traditional DeFi lending and staking methods.
Motivation
Expand Yield Sources – Incorporates an institutional-grade Morpho Blue lending strategy, complementing existing yield opportunities.
Attract New Users – Appeals strongly to institutional investors and yield-focused DeFi participants.
Thanks for putting this out here, great to see the integration momentum continuing on the Morpho front.
A few thoughts and questions from the governance coordination side:
We’ve seen relatively consistent usage of the MorphoUSDC Ark. Do we anticipate this cap increase (@BlockAnalitica) + onboarding translating into immediate uptick in demand? Any feedback from @Hyperithm on expected borrowing volume?
Overall, I’m supportive of this as a step to scale the Morpho integration meaningfully while still staying within the lower-risk band. This continues to be one of the most active and composable routes in the vault fleet.
Thank you for this proposal, could you expand on the risk management framework, specifically concerning concentration risk? For example, are there internal limits on the percentage of the vault that can be lent to a single borrower or against a single type of collateral?
Based on our internal simulations, we can reliably deliver similar yields for up to 5 million USDC under current conditions. We also have additional borrowing demand and plans to launch new markets in the Hyperithm Vault, though some rollouts have been delayed due to liquidity-stabilization challenges. With that in mind, we believe there will be ample borrowing volume.
Yes, from a risk management perspective, we’ve implemented several measures to mitigate concentration risk and protect user funds:
Pre-market Technical Analysis
Before opening a new market, we perform a contract-level technical review of both the oracle and the collateral. This helps ensure that the asset is secure and behaves reliably under various market conditions.
Emergency Bot & Auto-Liquidation Safeguards
We have a bot in place that monitors the market in real-time. If there are any emergencies (like a depeg event), it triggers alerts and automatically removes liquidity to prevent excessive losses.
Guardian via Aragon DAO
Governance-wise, we’ve set up a guardian role via Aragon DAO. This allows for emergency actions and added control over critical protocol parameters.
Concentration Risk Controls
While we don’t currently enforce strict per-user or per-collateral lending caps, we do implement indirect controls:
Interest Rate Curves: These discourage over-borrowing by dynamically adjusting rates based on utilization.
Market Caps: We set a cap on how much can be borrowed or supplied in a given market, which helps avoid overexposure to a single collateral or borrower.
I also support adding Hyperithm USDC market on Morpho to the Lower Risk Vault.. currently with it paying 7.78%, it would be the highest earning vault within the lower risk strategy, and with over 14M TVL, has the capacity to take at least several million in deposits by the looks of it.
Propose to push this to vote on Wednesday along with the Seamless and Silo proposals..
The initial parameters for the Morpho Hyperithm USDC Ark for the Low Risk Fleet Mainnet USDC were obtained using our risk model, which incorporates several metrics. The following table encapsulates these initial values:
Ark
Symbol/Vault
maxCap
Max. %TVL
maxInflow
maxOutflow
morpho
morpho_hyperithm_usdc
860,000
30.3%
860,000
860,000
At present, a 10-minute cooldown applies to all Arks in this Fleet. These parameters are initial values, and may change in the future according to market dynamics.