Decentralized finance protocol Compound is marching ahead with plans to tap into its competitor Morpho with the launch of new lending vaults on Polygon.
The new vaults went live on March 13 at 11:30 a.m. Eastern Time.
It comes after a governance proposal aimed at bringing Morpho (MORPHO)-powered vaults to Polygon (POL). Gauntlet and Compound (COMP) are launching the new lending vaults with $3 million in incentives – $1.5 million each from Compound and Polygon.
While this move has already been a major talking point for COMP holders and the broader DeFi community, the announcement signals a significant shift in the decentralized lending space. Essentially, Compound is transitioning from its own technology stack to Morpho’s infrastructure — a major development in the DeFi landscape.
Morpho co-founder and CEO Paul Frambot described the development as a “full-circle moment.”
“We’ve come full circle with Compound choosing to build on Morpho. Morpho started as an optimizer on top of Compound before evolving into a fully independent lending primitive. Now, Compound is transitioning to build on Morpho,” Frambot noted.
In January, Gauntlet introduced the proposal targeting the new lending vaults on Polygon. The platform viewed the collaboration as a strategy to improve risk controls, accelerate asset listings, and offer a sustainable path forward for Compound.
1/ Compound Vaults (USDC, USDT, WETH) usher in a new era for @compoundfinance. Each partner in this collaborative effort adds invaluable benefits to Compound:
Gauntlet — risk-optimized curation@0xpolygon — low fees + high throughput@MorphoLabs — scalable infrastructure https://t.co/8bSDHTvAzK pic.twitter.com/J4Ta9QsYU3
— Gauntlet (@gauntlet_xyz) March 13, 2025
Notably, Compound has seen its market share decline as Aave (AAVE) and Morpho grow, with Aave’s v4 seen as an upgrade that would further shrink Compound’s revenue and market size.
Using Morpho to generate the yield, criticized by others, is a pathway to benefiting COMP holders, per the governance proposal.
Compound will leverage Morpho’s lending infrastructure, Gauntlet’s risk management framework, and Polygon PoS’s low fees and deep liquidity to reshape the on-chain lending landscape.
Morpho, which raised $50 million in a funding round backed by Coinbase Ventures and a16z in 2024, currently has a total value locked of over $3 billion. The DeFi giant Aave’s TVL per DeFiLlama is over $17 billion and Compound’s is $2.3 billion.
