How Morpho vaults work: deposits, caps and curators
A Morpho vault spreads deposits across lending markets within limits set by its curator. Learn how shares, caps, roles, timelocks, withdrawals and fees work.
Updated
A Morpho vault is a pool that takes deposits of one asset and lends them out across several Morpho markets. It is how most people lend on Morpho. This guide covers shares, caps, roles, timelocks, withdrawals and fees, first for the original vaults and then for what Vault V2 changes.
Deposits and shares
When you deposit, say, 1,000 USDC, the vault gives you shares. How many depends on the share price at that moment. As borrowers in the underlying markets pay interest, the vault's total assets grow while the number of shares stays the same, so each share is worth a little more every block. To withdraw, you hand shares back and receive the asset at the current share price.
your balance = your shares x share price
Vaults follow ERC-4626, a common standard for tokenized vaults, so wallets and other apps can read them in the same way.
Where the money goes
A vault does not lend to borrowers itself. It supplies its deposits to Morpho markets that lend the same asset. A USDC vault might hold positions in markets that take cbBTC, wstETH and WETH as collateral, plus some USDC kept idle. Two things shape that mix:
- Caps: the most the vault may place in each market. A market without a cap receives nothing.
- Allocation: how the money is actually spread within those caps. It changes over time as the vault's allocator moves funds toward better rates or away from risk.
In a V1 vault, new deposits flow into markets in the order of a supply queue until each cap is full, and withdrawals are taken from markets in the order of a withdraw queue. You can see the current allocation of any vault on its page in the vault list.
Who runs a vault
In everyday speech "the curator" means the company that runs a vault. Inside the vault contract, the work is split between several roles, usually held by multisig wallets that need several people to sign.
| Role | Vault V1 | Vault V2 |
|---|---|---|
| Owner | Top administrator. Appoints the other roles, sets the fee, and can do everything the other roles can | Appoints the curator and sentinels. Has no direct power over assets or risk settings |
| Curator | Adds markets and sets their caps | Enables adapters and sets caps, fees, allocators and gates |
| Allocator | Moves money between enabled markets and orders the queues | Moves money between enabled adapters and picks the liquidity adapter |
| Guardian (V1) or sentinel (V2) | Can cancel pending changes | Can only reduce risk: cancel pending changes, lower caps and pull money back to idle |
Timelocks: advance notice of changes
Changes that could add risk have to wait. A change is first submitted onchain, sits in public for the length of the timelock, and only then can it take effect. That gives depositors time to read it and leave if they disagree. Changes that reduce risk, such as lowering a cap, apply at once.
- Vault V1: one timelock covers the whole vault. After the initial setup it must be between 1 day and 2 weeks. It applies to raising caps, adding or removing markets and changing the guardian. Changes to the performance fee are not timelocked in V1.
- Vault V2: each action has its own timelock, chosen by the curator. A new vault starts with every timelock at zero, so the values that matter are the ones actually set. A curator can also abdicate an action, which disables it forever, for example to promise that a vault will never add an access gate.
Withdrawals and liquidity
A vault can only pay out what it can pull back from its markets. Money that borrowers currently hold cannot be withdrawn until they repay or new lenders arrive. If a market is 100% borrowed, the vault's position in that market is stuck for the moment.
The interest rate model pushes back hard in that situation: at full utilization the borrow rate is four times its level at the 90% target, and it keeps rising the longer the market stays full. That pressure usually brings borrowers back to repay. The mechanics are in how Morpho interest rates work.
- Public allocator: a shared contract that lets anyone move a vault's liquidity from one of its markets to another, within limits the vault's allocators set, sometimes for a small fee paid to the vault. Apps use it to give a borrower more liquidity in a single transaction. The vault's caps still apply.
- In-kind redemption: if a vault is short of cash, a depositor can still leave by swapping vault shares for a direct supply position in the underlying market, then withdraw from that market when liquidity returns. In Vault V2 this is built into the vault through a function called
forceDeallocate, and the curator can set a penalty of up to 2% on it to stop misuse.
Fees
| Fee | Vault V1 | Vault V2 |
|---|---|---|
| Performance fee (share of the interest earned) | Up to 50% | Up to 50% |
| Management fee (share of assets per year) | None | Up to 5% |
| Can the fee change without notice? | Yes, the owner can change it at once | Only as fast as the timelock the curator has set for fee changes |
Fees are collected by minting new vault shares to the curator's fee address. A performance fee only comes out of interest, so a 10% fee on a 5% yield leaves depositors with 4.5%. A management fee is charged on total assets, so it applies even in weeks when yield is low. How fees change the number you see is covered in Morpho APY explained.
What Vault V2 adds
Vault V2 went live on Ethereum on 29 September 2025 and has since spread to other networks. Existing V1 vaults keep running, so you will see both versions side by side.
- Adapters: a V2 vault reaches yield sources through adapter contracts, so it is not limited to Morpho markets. At the time of writing, the adapters in Morpho's own code connect to Morpho markets and to V1 vaults, and the Morpho Registry, run by Morpho governance, lists the adapters that vaults using it may enable.
- Absolute and relative caps on risks: instead of one cap per market, the curator can cap shared risk factors, such as all markets that use stETH as collateral or all markets that use one oracle. An absolute cap is a fixed amount. A relative cap is a share of the vault, for example no more than 20%.
- Sentinels: safety roles that can only reduce risk, replacing the V1 guardian.
- Per-action timelocks and abdication, described above.
- A liquidity adapter: one chosen source that receives new deposits and pays out withdrawals first, alongside any idle cash in the vault.
- Gates: optional contracts that restrict who may deposit, withdraw or hold shares, for example for products that require identity checks. A gate can stop some users from withdrawing, so it weakens the guarantee that anyone can always leave.
- A management fee, as shown in the fee table.
The technical reference is the Vault V2 page in Morpho's documentation.
Checking a vault before you deposit
- On the vaults page, look at which markets a vault lends into, how much of it can be withdrawn right now, and its fee.
- On the curators page, see who runs it and what else they manage.
- With the vault earnings calculator, see what a rate means in money over time.
Common questions
Can a Morpho curator take my deposit?
No. Curators can only move money between markets or adapters the vault has enabled, within caps, and risky changes must wait out the timelock. They can, however, choose risky markets, and depositors bear the result.
Why can't I withdraw my whole vault balance right now?
Part of the vault's money is lent to borrowers. If the markets it uses are fully borrowed, that part can only be withdrawn once borrowers repay, new lenders arrive or the allocator moves liquidity.
What is the difference between Morpho Vault V1 and V2?
V1 vaults lend only into Morpho markets with one cap per market and one timelock. V2 vaults use adapters, caps on shared risk factors, per-action timelocks, sentinels, optional gates and an optional management fee.
Are vault fees taken from my deposit?
A performance fee comes only out of the interest earned. A V2 management fee is charged on total assets, so it applies even when yield is low. Both are capped in the vault code.