Morpho Midnight: fixed-rate loans explained

Most lending on Morpho has a variable rate: what borrowers pay and lenders earn changes block by block with supply and demand. Midnight is Morpho's protocol for the opposite: loans with a rate agreed at the start and a fixed end date, called the maturity.

Morpho published Midnight's whitepaper and code in May 2026 and launched it on Base on 21 July 2026, starting with USDC loans against cbBTC. It is a new, separate set of contracts, not an upgrade of Morpho's existing markets. Morpho has said it is neither a "V2" of Morpho Blue nor a replacement for it. Like Morpho's other core contracts, it cannot be upgraded or paused. On 22 September 2026 Coinbase began offering fixed-rate bitcoin-backed loans through it.

How it differs from variable-rate Morpho markets

Units: how a fixed rate is built

Midnight tracks positions in units. Each unit is worth exactly one loan token, for example one USDC, at maturity:

• A lender holds credit units: each is a claim on one loan token.
• A borrower holds debt units: each is an obligation to repay one loan token.

Before maturity, units trade below one. A lender buys units at a discount and receives the full value at maturity. A borrower sells units, receives the discounted amount now and repays the full value later. The discount is the interest. Morpho's documentation gives the rate for a unit price P as:

rate over the remaining term = 1 / P - 1

If a lender pays 0.95 USDC per unit, the return to maturity is 1 / 0.95 - 1 = 5.26%, before fees and losses. What that means per year depends on the time left:

The same price means very different yearly rates at different maturities, so always compare yearly figures.

How rates are set: offers

There is no rate formula in Midnight. Rates come from offers. A participant called a maker signs an offer off the blockchain, saying at what price and up to what size they will buy or sell units in a market. Another participant, the taker, executes that offer by sending it to the Midnight contract, which settles the trade on the spot. Offers can be filled in part, and by several takers.

Midnight does not publish offers itself. They circulate through outside channels, and software called routers helps takers find the best ones. In practice that means curators, market makers and apps quote prices, and competition between them sets the rate. Once a trade settles, it is not a private loan between two people: lenders hold credit in the market as a whole and borrowers owe the market as a whole.

Leaving before maturity

• A lender can sell credit units to someone else at the current price. If rates have risen since, the price will be lower and the lender may get back less than they would at maturity.
• A borrower can buy units back at the current price to cancel debt.
• A borrower can also repay directly. Each loan token repaid removes one debt unit, so repaying directly always costs the full amount due at maturity, with no discount for repaying early.

Apps built on Midnight may package these steps differently, so check the terms of the product you use.

What happens at maturity

At maturity the debt is due. After that moment:

• No one can take on new debt in that market. Trading to close positions can continue.
• Lenders can withdraw one loan token per credit unit as repaid money becomes available.
• Any borrower who still owes money can be liquidated, even if their loan is otherwise healthy. For this post-maturity liquidation, the liquidator's bonus starts at zero and rises to the full level over 60 minutes, which gives a late borrower a short window before the full penalty applies.

Before maturity, a loan whose debt exceeds what its collateral allows can be liquidated at any time, as on variable markets. A limit called the recovery close factor stops liquidators from closing more than needed to make the loan healthy again. How LLTVs and bonuses work in general is explained in Morpho LLTV and liquidations explained.

If liquidating all of a borrower's collateral still leaves debt unpaid, the shortfall is bad debt. It is shared by the lenders of that market in proportion to their credit and does not affect other markets.

Fees

• Settlement fee: paid by the taker on each trade, as a small gap between what the buyer pays and the seller receives. It depends on the time to maturity. The maximum allowed in Midnight's code works out to roughly 0.5% a year, whatever the maturity.
• Continuous fee: charged to lenders on their outstanding credit, capped at 1% a year. The rate is fixed when a lender enters, and later changes do not apply to that position.

Gates

A market can add up to two optional gates when it is created: an entry gate that limits who may lend or borrow, and a liquidator gate that limits who may liquidate. Gates cannot block exits, but fewer liquidators can mean slower handling of bad loans.

Coinbase's fixed-rate loans

Coinbase is the first large app to use Midnight. Since 22 September 2026, Coinbase customers can borrow USDC against bitcoin at a fixed rate, with the loan due at the end of the current month or the next one. Coinbase shows an indicative rate before you borrow and fixes the final rate when you confirm. The details, and how they compare with Coinbase's variable-rate loans, are in Coinbase bitcoin loans explained. For comparison, the live variable rate is on the Coinbase bitcoin loan rate page, and variable rates across Morpho are on the borrow rates page.

What is known and what is not yet

Midnight is young, so some things are still settling:

• Size. The Block reported about 30 million dollars of deposits during the rollout, in September 2026. That is small next to Morpho's variable markets, so prices can move more and exiting early may cost more.
• Vaults. At launch Morpho said that vault allocations to Midnight would come later. At the time of writing, a Vault V2 adapter for Midnight is still listed as in development, so Morpho vaults do not yet lend into it.
• Rolling loans over. Automatically moving a loan into the next maturity was announced as a later feature. Check whether the app you use offers it.
• Published rates. Coinbase declined to share its fixed rates at launch. Rates depend on the offers available at the moment you borrow.
• Penalty timing. Midnight's code ramps the post-maturity liquidation bonus over 60 minutes. Coinbase's help pages describe its penalty rising over about 15 minutes. We have not found an explanation for the difference. For Coinbase loans, Coinbase's own terms are the reference.

Morpho says the code has been audited several times and formally verified, which lowers risk but does not remove it. See Morpho risks explained.

The primary sources are the Midnight section of Morpho's documentation and the Midnight whitepaper.