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Merlin Egalite
@merlinegalite
Who better to protect Morpho Vault users than the depositors themselves? That's what @aragon has enabled; Morpho Vaults with mini DAOs run by depositors. Many risk curators such as @steakhousefi, @llamarisk, @re7, and @mevcapital have already integrated this trustless setup. But how does it work? Roles in Morpho Vaults A Morpho vault has 4 different well-scoped roles: - The owner, is the highest role in the hierarchy and can do what the curator and allocators can d - The curator, can list and remove markets from the whitelist - The allocators, can reallocate liquidity based on market conditions - The guardian, is the counter-power of the owner & curator roles and is here to protect users from malicious behaviors of those Timelock A timelock is in place for any action the curator or owner can take that might increase a user's risk exposure. This delays the time between when the curator proposes an action (such as listing a new market) and when it can be executed.
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Merlin Egalite
@merlinegalite
The Guardian During this timelock period, the guardian can: - Revoke a pending new timelock. - Revoke a pending guardian (which means it can revoke any attempt to change the guardian). - Revoke a pending cap of any market. - Revoke a pending removal of any market. The guardian can be set to any address or smart contract. Obviously, it will protect users effectively only if it remains incorruptible and aligned with the interests of vault users. This is where Aragon comes into play. Aragon Setup On Aragon, one can create custom DAOs onchain using OSx: "The Aragon OSx protocol is the foundation layer of the new Aragon stack. It allows users to create, manage, and customize DAOs in a way that is lean, adaptable, and secure."
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Merlin Egalite
@merlinegalite
Thus, a mini DAO can be established as a guardian for each vault, allowing token holders to vote on revoking pending actions. The voting period should be shorter than the vault's timelock to give users time to respond. For example, the Steakhouse vault has a 7-day timelock with a 1-day voting period. The DAO setup can be made fully immutable and trustless by removing the ability of the DAO to update its settings or upgrade the different smart contracts involved in the setup, such as the main DAO contract. Trustless and Flexible Risk Management Layer The setup above demonstrates that a Morpho Vault can be completely decentralized, transparent, and trustless while retaining the ability to evolve and respond to emergencies.
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Merlin Egalite
@merlinegalite
→ If a better setup is identified, the Guardian address can be changed to a new one with user approval. → Allocators can swiftly reallocate liquidity within whitelisted markets to respond to drastic market changes. For instance, they can place liquidity in an idle market to protect it from potential threats.
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