Why Morpho Thinks Open Credit Markets Beat Traditional Banks

In this episode of CEO Beat, Bam Azizi sits down with Paul Frambot, Co-Founder and CEO of Morpho, to explore how open on-chain credit markets can create more competition, better price discovery, and more efficient access to capital than traditional financial systems.

Paul shares his journey from studying distributed systems in France to founding Morpho while still in university, raising capital at a young age, and building one of the most widely adopted lending protocols in crypto. Along the way, he explains why years spent understanding blockchain technology ultimately led him to finance—and why he now sees financial infrastructure as one of the most important problems to solve.

The conversation dives into how Morpho earned the trust of major institutions, the role of immutable smart contracts and formal verification, and why infrastructure should eliminate the need to trust founders in the first place. Bam and Paul also discuss the challenges of launching a lending marketplace, bootstrapping liquidity, designing incentives, and positioning Morpho as infrastructure for banks, fintechs, and asset managers rather than a bank itself.

If you enjoyed this conversation, subscribe for more discussions with the founders and operators building the future of finance.

Connect with the Hosts & Guest

Bam Azizi: https://www.linkedin.com/in/bam-azizi-54117310a/

Paul Frambot: https://www.linkedin.com/in/paul-frambot/?locale=en

About Stable Pulse

Stable Pulse is a fast-paced, news-driven podcast covering the most important developments shaping the stablecoin and digital asset ecosystem. Each episode dives into timely conversations with industry leaders, operators, and policymakers, offering sharp insights and real-world perspectives on where the market is heading. With a focus on clarity and relevance, Stable Pulse breaks down complex topics into accessible, actionable takeaways for anyone building in or exploring the future of finance.

Transcript

Intro

Intro 0:00

Passage of the stable point legislation drafted by the Senate, dubbed the Genie Senate. Because analysts say a wave of competition can complicate things.

Bam Azizi 0:18

We have Paul from Morpho, co-founder and CEO Morpho. Paul, welcome to the show. Hey, thanks for having me. Yeah, thank you for um taking the time. I know you're very busy. You guys have been crushing it recently with a massive, massive round.

From Normandy To Morpho

Bam Azizi 0:34

We'll get to that in a second, but we'd love to go a little bit back to your childhood. Tell us more, like where are you calling from? Where are you from? Where did you grow up? Like anything that you're willing to share with our audience.

Paul Frambot 0:47

Sure. So I'm currently in Paris. I live in between New York and Paris. I do like half-half approximately. I'm French originally. I come from Normandy. And you know, my story is pretty short. I'm like 25. The only thing I've done in my life is studying in Morpho. So first part was like studying, you know, in Normandy, and then in Paris, studied like, you know, pirated and distributed systems. That was basically my way into blockchains, right? And distributed computing and consensus algorithms. So I studied that for a few years and and and yeah, and in the middle of my my studies, like ended up funding Morpho. In my second year at university, got funded, you know, 20 million, and and this is how it all started. But already know it was like a pretty you know standard like childhood and and start. Like um spent a lot of time doing two things. Um starting trying to start businesses and studying computer science and blockchains in general.

Bam Azizi 1:48

So we're doing pretty much the same time. So it's a startup before Morpho, or like your thought about bus like starting a business. How did you get to this entrepreneurial journey?

Paul Frambot 1:58

So it's funny because you know people usually assume this is my first venture because you know I started Morph at like 20, and and so they're like, hey, that that must be the first thing, right? But what usually they don't know is that I actually started like five or six years before that, uh trying a lot of different things, right? And so I tried things ranging from like, you know, different business models for real estate platforms, or at some point I was doing like caritative auction for streamers to be able to like sell and auction like experiences with them. Um I've done stuff around IP, I've done stuff around education, and like I I've really tried a lot of different things throughout many years. Some were incubated, some failed after like six, seven months of not finding product market fit. Um and and you know, each each of those came up with like very strong learnings and you know helped me like build stronger mental models about like what building a business actually means and what are the you know things you should do, should not do. And one of the things I've learned was uh building an unfair advantage, like something that you have that others don't. Um and so that was one. And the second one was like finding a market and uh foundational technology that that could, you know, you could get leverage from, right? And and I was uh as I was learning this, I realized that one good timing for me would be blockchains, right? Um and so I decided back then I should become the most knowledgeable person, you know, in Paris about blockchains. And and this is how it all started, is like as I was building, like trying those businesses, I started taking every single possible class about blockchain and computer science you could ever think of. So I had like probably eight or nine different ones in parallel that I was like attending, um purely like without even like being in the given university. Like I would just like email like the teacher and say, hey, like, you know, or the professor and say, Hey, like I'd love to join your course. Like, can you can I just like join? Um and yeah, and and and this is how I sort of kickstart two things is having a deep understanding about blockchains, which which by the way, I'm still learning a ton about this, like this technology is so mystical. Like every every year I found like new mental models about new ways of clarifying my understanding of what this technology even is and what it means and for for its usability. So that was one. And the second thing was actually building a network of like you know, academics, smart people that were thinking about those topics, right? And one day I decided to bring the two together and say, hey, you know, what about doing entrepreneurship? But with this knowledge that I've been building over like the few years.

Bam Azizi 4:42

So what was the first day that you started poking around blockchain until like you started Morpho? Like how long this period took?

Paul Frambot 4:52

Probably three, three years. Um so I I so I joined university. So in France, you you before joining university, you do two years in a preparatory school. So I did this between my 16 and 18 years old. Um and I started thinking about blockchain in my second year. So around 17 is is when I started. Um and so between 17 and 20, this is where I spent a lot of time, like, you know, uh learning computer systems.

Bam Azizi 5:22

You're not a Gen Zier, you don't have instant gratification. It took you three years to hard work to study.

Paul Frambot 5:29

Yeah, and you know, I I I I like to go deep on things and like build a very foundational understanding. And you know, it's just like it's especially utility around blockchain. Like, why why do you need blockchain? Like blockchains are super cool, but like what do they bring to the world? Like, what fundamental utility does this bring that is beyond speculation, you know? Um and and took me a lot of time, to be frank, to understand. Uh like and and and again, I'm still learning like every day, like what this means. But um, and I

From Finance Skeptic To DeFi

Paul Frambot 6:05

think you know, looking back, that was probably the most valuable journey. Like doing really putting in the efforts of like questioning like the utility uh for so many years uh is really like made a shaped a lot of the vision for for Morpho. Um and and funnily enough, like initially I the reason I did not start a project uh in in blockchain earlier is is I did not like finance at the time. I was like, hey, like finance is like it's not for me. Yeah, it's not for me. Like you know, I I wanted to, you know, I wanted to have a maximum impact for the world and and create value for everybody. And and finance felt like the only industry where you don't create value. You just move value around, right? And and yet you take a cut, right? And and you're like, damn, like that seems extractive, right? And and actually, you know, so for and then I realized that actually the the value prop is is connecting, right? It's actually about like you know, bringing capital, you know, in space and time across space-time and risk and like where where it's needed the most. And this in itself is an act of value creation. Um and and what I realized is that you know finance is not evil at all. It's actually extremely positive and and and like the bedrock of our civilization. But but the current infrastructure uh is what introduces the friction and and and and that basically makes it extractive, right? And so so when I put two and two together and realized that that blockchain was the opportunity to push all that value from the center of the infrastructure to the edges of the network, you know, in the end consumer. This was really this literally the same day I realized that I started working on Morph. I was like, oh damn, I actually need to work in DeFi. Like this is a necessity. Like I have to work in finance, I have to like disrupt that that that industry that's that could do immense good in general, uh, if I were to work on this. So that was the story, basically. And this is how I started. And the same day I was like, okay, DeFi, what's the most interesting to do in finance? Financing, for sure, is like, you know, the the and so and this is why I started working on the Morphone.

Bam Azizi 8:15

And then this is like what year, 2022, did you start it? I started in 2021. We write it in 2022. What was the first half or second half?

Paul Frambot 8:25

Because it matters.

Bam Azizi 8:34

Yeah, like it crashed after. Yeah. Okay. So you started that like you were like second year in university. You said like, I want to start Morpho, and then you got 20 million dollars, maybe a year after that. And then you what what happened to your studies? You just drop out? I did not actually.

Paul Frambot 8:53

Well, I actually never told investors at the time I was studying. You want to get your bachelor at least. Yeah. And you know, it's like it's maybe a very stupid French thing, like I you have to get your PhD at least. Yeah, I guess it was like it was probably a bit like this. You know, looking back, that was stupid. Uh I but I just loved learning at the same time. I I I just wanted to finish. And but but but so we had all this money, and and but we we still fin went all the way. Um and and my co-founders were also studying, by the way. Uh we were all at like at an university. And and and you know, like what's funny is that when we started raising, like I could tell a big contrast between European funds and and American funds and how they approach the fact that we were young. Like, one would be like, hey, just come back two years. Yeah, yeah, exactly. Whereas the other one had the opposite effect, right? It was like, oh Dave, you're like still so young, let's go. Like, you know, that gives you a 2x on your vowel, right? Yes. Um so that was fun. And you know, like European funds have their reasons, but like, yeah, that was a pretty sharp contrast at the time. Um and any, and so so we finished studies and and we hired a bunch from our university. So more for initially, like the average age was like 21 out of like 10 people. Um and and and that was fun. That was a very fun and chaotic time.

Bam Azizi 10:25

Yeah, we were just building and hacking around.

Paul Frambot 10:27

Yeah, I get it. Yeah, we just like I remember that the first like summer we sort of rented a house like for five weeks straight, and we just put everybody in there. That was your gross. Yeah. No, that was like uh an Airbnb we had rented in like the middle of nowhere. And during like five weeks straight, we would just work 24-7. And there was like that was just like another time. It was pretty crazy and and and awesome, to be frank. But yeah. Now we're much more borrowing, we're like 80 people, people have commitments, personal commitments.

Bam Azizi 10:59

So we're like 40-year-olds as well, like more adults in the room, less chaotic. Yeah, exactly. Yeah, ready, ready for

Immutable Code And Formal Verification

Bam Azizi 11:07

enterprises. So then you started Morpho, and then when we met, like I think a couple of years ago in Paris, you st you told me like I said, like, why should an institution trust like a bunch of young kids? Like you're you're like 21, 23, whatever. And you said something very interesting that still sticks to me. So like you're the most audited code on the planet. Like, tell us about like how you went from this chaotic to like enterprises like Coinbase and all these banks trusting you.

Paul Frambot 11:37

I guess the whole point of our industry is to be such that we should not be trusted. Right. It's it's like it should be building infrastructure where the the we can entirely remove ourselves from the picture. Um and and the process to do that um is is non-trivial, right? Um so there's a few things. First, the financial operations that are going to be run is at the end of the day a piece of code, right? And the piece of code is not that crazy. It's pretty simple things. Like, you know, when you do a loan, you have what? Like the the amount that you want to lend, you have the interest rate, you have the maturity, you know, is there's a liquidation, maybe there's some stuff around the liquidation. It's pretty simple stuff, right? Credit is is the the base like obligation contract that two individuals are entering uh is is is pretty simple. Um and in Morpho, that's 600 lines of code, right? And so I think the first the first takeaway we had as we were building this is um this does not need to be complex. And obviously you have a lot of like comp complexity that you can build around and you can layer, but the core of the matching engine, where the core of the you know capital is going to be aggregated, this must be the safest, right? And so so we came up with this protocol that we took a lot of time to build, like a lot of time and effort, uh to come up with those 600 lines, which are the most like audited per line of code by quite far, I think, um, in in in EVM. I haven't checked in a long time, so maybe that that that changed. But um and the most important thing about this was the way we approach the like the coding paradigm is very different than traditional software engineer. Like Morphous code is immutable, right? We can't change it. It's it's there forever. What does that mean? It means that if it can be hacked, it will be hacked, right? And so you have to think because because you're you're gonna integrate that probability over an infinite period of time, right? So you have to think very differently about software engineering um than you would in like a traditional uh code base. You have to think about it like it has. Yeah, there is no continuous patching and okay. Exactly. You can't put like you know, just guard rells and iterate and have like alerts and everything. It's like a piece of code that anyone can use and like control, and people don't want us to be able to control it or change it. That's the feature, right? No, it's not about answering. Exactly. And so and so the the the the key answer to all of this and that we've I'm glad we figured pretty early on is formal verification. It's basically come up with a set of properties that you want to be true about the protocol and just mathematically prove them, right? And so in Morpho, we have a long list of like you know security properties about the code that you don't have to trust us. Like if you trust math, it's actually true. It's like literally true. Um and and and and so that is basically one of the key things that took a take a lot of time to do. It's surprisingly long and painful. Even and you can only do this on very simple pieces of code that are not too modular. Um and and and this is truly what gave the confidence of everybody to think, hey, I just don't even have to trust those guys because I have a proof, like mathematical proof, that it's gonna operate as as as intended. So that truly helped. That truly helped. And then obviously, like Lindy, the test of time and everything. You know, you have now tens of billions of dollars on the platform that are sitting in this smart contract uh over many years, and and and then people got confidence that this could be um you know uh used at scale, even if you're the you know, trillion dollar size like asset manager. And as people got to use it more, they they understood and and and any. And I think now we reach a point where basically anyone is trusting Morphous code as like core prime infra, whether that is the coinbases of the world or just like institutions or or banks to your point, etc. So yeah.

Bam Azizi 15:35

Makes sense. And then what happened, like uh one big question for you. Why not another L1 or L2? Why you'd settle on protocol and token?

Paul Frambot 15:48

You know, Morpho's goal in general at the high level is to connect ambition with capital, right? Which is like connecting people that want to do stuff that need financing with people that believe in them and that have capital to invest, right? And that is agnostic of the underlying technology. Uh our job is to foster this like open credit network where people get to connect and get to match with one with one another. And and we think the best way to do that uh at the current time is through blockchains, right? And and because blockchains provide like open infrastructure that fosters like connectivity and neutrality in a way that allows institutions that don't trust each other to actually still connect with one another. We felt like this was a commodity and was a given that we could leverage uh instead of building our own. So that's like the first take. And then there is more of a business take, which is like, hey, we'd rather be friends with every single layer one and every single layer two and partner with them and their distribution, you know, like you know, Robinhood as Robinhood chain, Shripe as tempo, Coinbase as base. I'd rather be friend with everybody than build my own that is competitive and introduce any conflict of interest. Like what I'm looking at is building the credit network. How this credit network is operated is kind of like agnostic to me. Like I just want to build, like use the base, the best infrastructure to do so that you know fosters the maximum amount of matching between lenders and borrowers.

Bam Azizi 17:24

Makes sense. And how long did it take for you to go from like this is a good idea? I want to like you went from like I don't know anything about finance to now you're interested in finance.

Go-To-Market And Liquidity Bootstrapping

Bam Azizi 17:34

How long it took for you to go from like day one to the first dollar coming to the protocol as a lender?

Paul Frambot 17:41

Yeah, I guess to the very first so Morpho had three versions in total. Uh second version is the most popular currently that is live, etc. And the third version is about to launch in in a few days, weeks. Um the first version of Morpho we built in like six to nine months. Still took a lot of time for a first version. Um we so so the way we approached it is like basically we looked at like existing you know, lending and borrowing protocols. And I just went on-chain and I looked at the depositors, right, and say, hey, who's depositing there? And then for each of those wallets, I built like a few like tracking algorithms to understand like who they were, trying to de-anonymize them and think like, hey, like do you have an ENS attached to this name? Like, oh, they interacted with this coin or this address, etc. And now once I de-anonymized them, I just reached out to them, right? And I found my way you know through investors, through connections, like to those addresses. And and then and and then I presented them with our protocol, which you know was was providing better yield and better rates for financing. Um that helped um a lot. Um and yeah, that so that was the initial like go-to-market strategy. Um that was like first dollars in, like the first few millions. And then what happened is that we started thinking about distribution and like more crypto native distribution, like all those DeFi apps, those wallets that we could get in. And this is what took us to like a few hundred dollars.

Bam Azizi 19:17

So there are some people who want to lend, some people want to earn money. Like, how did you find both part of the equation?

Paul Frambot 19:25

It's uh it's a great question. So Morpho is a marketplace. So so you have a cold start problem, right? And and for the first version of Morpho, we knew this was gonna be very tricky. Uh and so what we did is we actually piggybacked uh existing marketplaces. So at the time you had compound and and and Ave. And so what we would do is like if we would welcome any lender, any bar, if we have a match for them, we would match them through Morpho's matching engine at a good rate. If we don't have a match for them, we just fall back on compound, or we just fall back on Ave. And this way we had no cold start problem, right? The downside though of this model is that we weren't we were basically like leeching the existing liquidity of protocols, but we were not like independent, right? But it was a great go-to-market strategy because I could come to users and say, hey, you're gonna get as at least as good as compound or at least as good as Ave because we're just gonna in the worst case, you'll end up there. But in the best case, you'll be, you'll, you'll find a match and you'll be you know better better better off. And then we wanted more independence, and this is when we started building our own marketplace. And the the one of the most underrated things about blockchain and and and marketplaces that are on-chain in general, is that everything is programmable, as well as the incentives that you know you can use uh uh within marketplaces. So you can incentivize very specific behaviors uh on marketplaces to solve this cold star problem, which we did for the second protocol. It's like, hey, we had no lenders, we had no bars. So what we're gonna do is that we're gonna program incentives for people to join, even though there is no counterpart, and we're gonna give them ownership in the network as an incentive and and for a limited period of time. And and this way we bring in inorganic traffic. And by that time, we need to work, go to market, and find actual users to to to as and you know, basically you you stimulate the bootstrapping of the marketplace with those tokens. And and yeah, and obviously like incentives have been used in crazy ways in DeFi. Uh it's just like fire, you know, like if you don't like you could burn your house with it, or you could just like you know, do useful things uh and build rocket ships. Uh and so to me, this is like the the biggest power and curse of crypto is like the programmability of incentives is is is so incredible, but also so dangerous.

Bam Azizi 21:49

Yeah, 100%. And you decided to like go and piggyback on top of Ave and compound. Now you're competing with them because you have. Your own marketplace. Why people who are like Web3 native and they understand differences, they should join Morpho versus Ovid Compound. What's why you're better? Other than like you're just the most audited code on the planet.

Paul Frambot 22:12

Yeah, I guess like the positioning is very different now. Think of Compound and Ave as a bank, right? You deposit your crypto, they're gonna manage it for you, they're gonna invest it, uh, take risks, uh, you know, manage the code, change the code, etc. Whereas Morpho is not a bank. Morpho is infrastructure for a bank, right? So what does that mean? It means that if you want to build your own Aave, if you want to configure it the way you want and control it all the way, you can use Morpho for that. So we're not exactly directly competing with Ave, we're one layer below. Our builders, the people building on Morpho, are competing with Ave, right? Like, so for example, like Coinbase is building vaults on Morpho, right? So they have their own strategy that they you know, they have agency over, control over, they control the code, they can control you know through a curator, they can control the risk, etc. And that product is competitive with Ave. So Morpho is an infrastructure play. We're not finance people, we're computer science people that allow finance people to come on chain and have control over their their own strategy.

Bam Azizi 23:12

Um and and I think this is, you know, people can see why we've basically on Morpho versus Aave and others, they are forced to just accept whatever they're putting on in front of them.

Paul Frambot 23:24

I think this is the key differentiator, especially as we went towards enterprises. And the main reason why every exchange and fintechs have been choosing Morpho over the last like you know few months and and and years is they get to control, right? And and when you have something like Kelp you know, hack happening, like you know, all the fintechs on Morpho that were building on Morpho, they did not even call us because they knew what they were exposing themselves to because they chose, right? Um and and and that so that's like the key differentiator is like TratFi wants to control. Like they don't want to let like crypto native people invest on their behalf. This is their job, basically. This is asset management, right? So they know they know they know what to what to do, right? What they don't know how to do is how do you get the technology and how do you get global connectivity through on-chain rails? And this is the value they're looking for. They're not looking to reinvent underwriting. Like at the end of the day, the people that need financing are gonna be the same. What's gonna change is Rails and the openness of those Rails that's gonna foster more competition, more connectivity, better liquidity, better pricing, all that type of stuff, right? Um and and you know, I've always been like thinking about like you know, cryptos like PMF overall, is like obviously there is the speculation part, but but but the most true PMF will be when crypto becomes infrastructure. And I think about the same for for Morpho. Like I don't see our role as managing capital, I see our role as providing the rails for people to connect.

Bam Azizi 24:44

Makes sense. And and I have two questions. Second one is more interesting, but I will learn from I learned from you to be patient. So the first question is like how these enterprises are going to trust

Why Enterprises Move On-Chain

Bam Azizi 25:01

you? Like, what's your pitch to black rock of the world? Like people like who are owning or managing trillions of dollars in assets, they are happy with their 4%, 5% they're getting from their banks. So why they should come on chain and and trust a bunch of computer science kids like me and you? It's a great question.

Paul Frambot 25:23

Um I think there are four reasons. Um the first one I'll take an example is if you look at Coinbase and what they did, why did Coinbase move on-chain? Coinbase used to have a centralized lending product. They were like, you know, in the Coinbase app you could get loans, right? Um on on the back of your Bitcoin. But but getting those loans, they were financed through like, you know, a desk or I can I like basically in a centralized way, which means that they were limited in terms of the capital they would connect with, right? Which means the size of the loans they were offering were limited and the rate that they could get was also limited. Right. If you plug on on-chain rails, like Morpho, the difference now is that the infrastructure is open. And if the infrastructure is open, it means that anyone can compete. And so what happened when Coinbase started plugging onto BASE to settle their loans is that you had billions of dollars, literally, that came to BASE to compete to give the best possible rates to Coinbase users. And that that was to me like you know, DeFi first proof of PMF that we could offer a product that was the exact same parity with like a a web tube product. So you have the same feature parity. It looks the same, we have account abstraction, we have layer twos, like you don't know there is a wallet, you don't know there's a chain, you don't know, you don't pay for gas, like all that type of things. Yet the product was financially a better product with better interest rates, with better liquidity, because it was leveraging open Rails. And why was that better? Because openness fosters competition, right? And so lenders were bidding to death to basically provide the best possible rates to Coinbase users, which pushes value towards Coinbase users. And that was the key number one reason why people should move on-chain is because openness is gonna bring in more liquidity and better pricing discovery, right? That's just inevitable, right? And and and that there is maybe there's a timing question of for depending on the type of loans, it won't happen, like you know, existing infrastructure is already working well, etc. But but liquidity bags liquidity, and all those compounding effects are fostered by openness, right? So it's a snowball that is inevitable, right?

Bam Azizi 27:35

Just faster, more efficient, more programmable type of lending.

Paul Frambot 27:40

So that makes sense. I guess and and just sorry, just to just to add on this, is is really from a lending perspective, it's just the connect because it's open, it's more connected, and so it's more liquid, and it's more competitive, and so you get better prices, is is basically it.

Bam Azizi 27:54

You get better prices, that means you get more capital, you get better, more efficient, and then at least more capital. So it's just a wireless loop. So that's great. And that leads to my second question: like, what does morpho mean for everyday people? I understand that if I want to get a loan today, I have to go to the bank, I have to stand in line, I need to say hi to a bunch of people I don't know, like a bunch of strangers, and like apply for a loan, submit a bunch of information, and then it probably takes me like three to five days at best. But with a protocol like Morpho, I can just get a loan right away against my asset. Like, and everything, like as you mentioned, there is no like document uploading, there is no wait in line, everything happens online, it happens fast. But I can get an unsecured loan from my bank because they know me. Um, but unchained everything like kind of anonymized. How do you solve that problem?

Paul Frambot 28:57

A loan fundamentally is a promise of repayment. You're gonna promise that you're gonna come back with more money than you were given. Um and and the question is how do you back that promise? How can people trust you? One way to be trusted is to have a big stash of Bitcoin, right? And say, hey, if I don't come back, this is yours. It's not the only way. You can also provide identity, you can provide all the documents you mentioned that could foster trust uh in your in your promise of repayment. Morpho's role is uh basically to allow you to express why you should be trusted to the entire world. Right. Instead of going to a single bank that is gonna give you a loan and is gonna own the pricing, is gonna own you basically. Uh instead, you go to Morpho, you say, hey, here's why people should trust me. And Morpho is gonna connect you to thousands of banks and it's gonna have them compete for you. That's the thing. That's the main difference, is that we're gonna foster, like think of Morpho as like a visa for credit, where once when when you come to the Morpho network and you explain, here is my collateral, here is my identity, and you submit all the things that you think we should foster trust in your ability to repay, then then every single lender on the other side's side, whether that is a Vault Curator, whether that is BlackRock or an individual that is looking at your intent, they can just all compete to give you the best possible rate, right? And and this is basically what Morpho is, it's the machine to discover the price of what you know people should be trusted at. And and you know, I hope that in the future, Morpho is invisible to everybody, but they just have a way to obtain, like, you know, they can basically power their ambition with open access to capital, but truly open, one that is like competitive and that can price all of their trust guarantees, basically.

Bam Azizi 30:45

Makes

Stablecoins Vaults And Risk

Bam Azizi 30:46

sense. And what what is the role of a stablecoin in the world of Morpho? Do you even care about a stable coin?

Paul Frambot 30:52

Stable coins are important. Like uh stable coins are you know, one could think of them as the checking account, um and and morpho as like the savings account, or at least the vault as the savings account, like the non-custodial way. Um that that's one mental model. You know, stable coins at the end of the day are just a database, right? Um and and that accounts for like who owns what. And and and Morpho is like basically an auxiliary to that database that is basically explaining what are the obligations of people uh denominated in that stable coin. So for us, it's more like a technology uh that that that we use that is very convenient. Um yeah, it's it's a tool for us, but you know, we could settle, we could settle in any asset. Like if you want to do a Tesla loan or like tokenize like SpaceX, like whatever shares, uh you can lend them and do securities lending. Or if you want to lend your RWAs or like you know, your your credit funds, like you can do that on Morpho. We're pretty agnostic. Turns out stable coins is you know what is driving most of the loan settlement, because this is how people account for their obligations usually. But it's not the only way.

Bam Azizi 31:59

Makes sense. And are you competing with staking protocols and vaults that they're giving like 20% return? Like how do you compete in that ward? That like high like higher interest and higher rates is always um incentivizing people to just move at least part of their assets there.

Paul Frambot 32:20

Morpho is like risk agnostic. So you can have pretty crazy risky stuff on Morpho. It's a permissionless system. So you can anyone can come in and offer products that are very risky or that are very low risk, right? Like we don't have an opinion on that. Um then it's for the distributor to surface that to the user and you know properly explain the risk, of course. And if some products are illegal in certain jurisdictions, they don't show them, like all this type of stuff. We are generally complementary to any vault stack that exists. Like we have our own vault stack, but you have other people building their own vault stack, and they usually all end up depositing on Morpho and lending on Morpho. Um so so so that's one. For the staking specifically, we don't do blockchain staking like native asset staking, like e-staking or soul staking. Uh we think of this as like a separate business and we don't want like we don't want to unfocus. So yeah.

Bam Azizi 33:16

So you but but can Morpho be used for vaults and people who are staking, or you're like going head-to-head and competing for the capital?

Paul Frambot 33:27

So for native proof-of-stake staking, we don't compete, it's just like a different product. That you know, if you have ETH, you want to stake it to secure the Ethereum blockchain. That's a separate product from Morpho. The the ETH is not lent out, right? It's just staked in the proof-of-stake sense way. So we we don't compete with those. Um if this is a vault provider, which is investing the asset somewhere, usually we we so we have our own vaults, but for us, like our vaults are open source. It's like a commodity that we put out for anyone to deploy their own vault. Uh, but we're we also welcome other vaults to deposit on Morpho. And so the the lending, the credit markets of Morpho, like most vaults invest in them. Uh, so we don't see them as like a uh a competitor at all. We see them as like a complement uh to us, right? That basically allows us to get more distribution, more capital, etc. And we partner with all of them, by the way. So so yeah. And this is why we host Vault Summit in the first place. Like in Vault Summit, we we welcome a bunch of like Vault players uh and and they get to like you know deposit um in into more for markets.

Bam Azizi 34:33

Makes

V3 Roadmap and Closing

Bam Azizi 34:34

sense. Um this this was an amazing conversation. I'm sure a lot of my audience learned a lot about staking and lending and on-chain protocols, but you did a massive round recently at $2 billion market cap. Uh and you want to tell us more about that and what's what's the plan for the next two to three years? How do you want to spend that money?

Paul Frambot 34:55

Yeah, sure. I guess you know, crypto is at its turning point where the speculation part is dead, right? Like if I'm being honest, like there's no such thing anymore as like crypto native businesses that are and that said that part of crypto is dead, but we can like the one that is like thriving is definitely the infrastructure part, like crypto being, you know, crypto for payments, you know, uh stable coins uh and and credit uh in in general. And the reason why this is thriving is like you have massive interest from distributors, like very large distribution. And you know, just like you you guys know this even more than than than than we do because payments came in earlier in the time to market than than than loans. Uh but I can't think of a single fintech now that does not have a roadmap to fully move on chain in the next two to three years. Like literally everybody. Like uh and and everybody's integrating self-custodial accounts, everybody's integrating yield, everybody's integrating loans, stable coins, payments, uh stablecoin cards, like uh uh everything. That's just the future of the infrastructure of every single fintech out there. Um and and then the question for Morpho is like how do you build the network? Like how do you build, how do you effectively build, like um uh go to market and and go for each of those those uh institutions that have capital that is moving on chain, and how do you connect them to the network? And that takes a lot of resources to build the engine, the team, that is gonna effectively bootstrap the market, right? So one should think of this raise and the reason why we raised the same way Visa made like massive investment as they were bootstrapping the network like you know 60 years ago. That's the same idea. It's like network businesses like Morpho require an immense amount of activation energy to go after every single partner, distribution partner, and and get them into the network, right?

Bam Azizi 36:56

Makes sense. And so like what what are the sneak peek that you can tell our audience about things that will happen soon, other than like version three that's coming up?

Paul Frambot 37:07

Yeah, so so this version three, you know, obviously quick quick note on that is that we're just gonna introduce like fixed-rate fixed term loans, um, which come in over cloud transform, but also in under cloud transforms. And that's gonna unlock a lot, right? So that's that's the first one. That's huge. Um with this comes two types of players FinTechs and TratFi. Um TratFi wants to operate the Rails, FinTechs wants to distribute the Rails, right? And you know, we we disclosed that you know very large partnership that we're having with Apollo, that is like a one trillion dollar size fund that is you know moving on chain uh for their credit with Morpho. Uh but one has to think that every single like large asset manager or large bank has now a roadmap to to operate like their financial services on-chain. And and with that, the reason why they're interested is that they see AUM coming in you know six to eighteen months through those like fintechs, right? And they don't want to miss out on all this AUM that is coming. Um Yeah, and so I think you know, if I were to shape what the the following few months are gonna look like is basically gonna be fintech in the front, you know, try to find the back, operated on on-chain rails.

Bam Azizi 38:19

That's awesome. Yeah, I think the future will be on-chain. Um you're like building the payment version of Morpho and uh on-chain uh the network, you're building the network for lenders and uh lending in general. So I'm really glad that we had this conversation. There is a lot of uh mutuality and a lot of things in common, but uh I learned a lot myself. I'm sure like our audience will also enjoy it. Uh I have like a couple of like fun questions to ask to wrap up the conversation. One is like what is in the water in France? Like you have a lot of French blockchain companies from Ledger, Bastion, Preview, and you like is it is it a big thing in in Paris? Like you have a big community of blockchain engineers?

Paul Frambot 39:04

Yeah, I guess. You know, I think historically France has done pretty well when it came to finance. Like, I think fundamentally it comes from like education being very math-oriented. Um, so if you look at like trading desk, like in the US, like all the exotic options traders, they're they're all French, right? Like for whatever reason. Uh so I think just part of the educational system has a bias towards this type of of technology and and applications. So I think that's one. I will say though we're not entrepreneurs entrepreneurs at heart, you know. So we've even though there's a lot of like engineers, uh it's pretty rare to find founders. Um and and usually they would go to the US, right? Like to fund companies. And I think that's the case of NAS or or or or Henry from Privy. Um and um anyhow, so you know, I I think that's probably the fundamental reason why we see a little uptake. I will say though the ecosystem um um has lost a little bit of momentum uh uh in general, but I think this is probably true for all crypto uh uh overall. Um just the market concentrating around fewer companies uh and as as the ecosystem matures.

Bam Azizi 40:17

But you're not coming to US or staying in French, France, right?

Paul Frambot 40:21

I I am in between the two, actually. So I am you know still waiting for visa approval. But uh I'm like 40% in New York, 40% in Paris, and then 20% wherever Morpho needs me to close someone, uh which means a lot of trips.

Bam Azizi 40:35

I know, I know. Um my last question, which is the tradition of this podcast, is what's your favorite restaurant? What's your go-to restaurant in Paris?

Paul Frambot 40:45

Well, you know, I'm tempted to not answer that for security reasons because we just a good restaurant in Paris. Yeah, I I guess I guess you know I I like Chinese food in in Paris. I think I I think Paris is amazing, Chinese food. Overall, not super good Asian food, but Chinese specifically, whether that's you know Sichuanese or Shaangxi food is is is pretty amazing here. Um so yeah, I think I would go for that.

Bam Azizi 41:12

Okay, sounds good. Thank you, Paul, again, for your time. I really enjoyed the conversation. Thank you. Thanks for having me.