Connecting Morpho Vaults to Morpho Midnight Morpho Vaults V2 (“Morpho Vaults”) are expanding the types of credit they can allocate to. Today, Morpho Vaults allocate to variable-rate Morpho Blue markets. The Midnight Adapter will go live in Q4 2026, enabling all new and existing Morpho Vaults to allocate deposits into fixed rate Morpho Midnight (“Midnight”) Markets. This opens Midnight to the $5B+ already held in Morpho Vaults. For lenders, it means that vaults can offer more predictable, fixed-rate yield for a set term, without having to manage positions themselves. For vaults, it opens up a new design space and greater differentiation. New Design Space & Differentiation for Vaults On Blue, vaults stand out through the markets they choose and the risk settings they use. Curators are largely choosing between the same underlying market structure and differentiating through market selection, allocation weight, and rebalancing. The Midnight adapter changes that materially, opening up a new design space for Morpho Vaults: Two market structures instead of one: By opening access to Midnight, vaults can be configured to allocate across both market structures (Blue & Midnight). This gives curators more ways to show the value of their vault setup. Configurable vault utilization: By allocating across Blue, Midnight, and idle markets, curators can set vault utilization targets. Blue targets 90% utilization, which curators can lower by holding idle liquidity, but not increase. Midnight enables utilization approaching 100% through fixed-term positions. Higher utilization can increase returns at the expense of available liquidity, and vice versa. Depositors should understand each vault’s liquidity profile before depositing. Vaults can set their own terms: On Morpho Blue, vaults receive the rate set by the market’s interest rate model. With Morpho Midnight, there is no formula. The curator configures the risk parameters and the given rate at which the vault is willing to accept. The result is vault infrastructure that enables a high level of differentiation, not just from the type of collateral assets, but in pricing, term, and liquidity. How Morpho Vaults handle Midnight positions Midnight fixed-rate positions behave differently from variable-rate Blue positions. The design challenge was to enable the allocation from Morpho Vaults to Midnight while preserving the vaults’ noncustodial properties and user protections. As a result, the Midnight Adapter enforces the following: Buying protections: A vault’s Midnight positions must stay within its exposure and maturity limits. Selling protections: By default, a vault cannot sell a whole position for less than the amortized value. An exception to this would be subject to a timelock. Caps: Every Midnight position counts against the vault’s caps on the things that define its risk, such as the collateral asset and its parameters. Curators can also cap how much of the vault is lent for longer periods, for example beyond 90 days. Caps can be lowered immediately, but increasing them is timelocked, so depositors can exit before any increase in risk applies. In-kind redemptions: Users can exit a vault position into the underlying Midnight position, even when the vault has no idle liquidity, through in-kind redemptions. Amortized valuation: Each position is valued at the amount due at maturity, discounted at its entry rate. Its value accrues steadily as maturity approaches. Together, these design choices keep Morpho Vaults noncustodial and put predefined limits on the risks a vault can take with Midnight positions. A defining change for Morpho Vaults & Midnight The Midnight adapter is an important step in expanding Morpho Vaults beyond a single market structure, and opening $5B in liquidity to Midnight Markets. Morpho Vaults will soon be able to allocate liquidity across both Morpho Blue’s open-ended, variable-rate markets and Midnight’s fixed-rate, fixed-term markets, giving users a choice of vaults with different liquidity and variable yield profiles.