🦋Isolated Markets

Isolated Markets

Moonwell now supports Morpho Blue's "Isolated Markets," allowing users to supply and borrow assets from isolated lending pools. Unlike Moonwell's existing "Core Markets", which are based on Compound v2 and use a shared pool of liquidity, Isolated Markets build on the Morpho Blue protocol and offer unique benefits.

What are Isolated Markets?

Isolated Markets are specialized lending pools that allow users to:

  • Supply a designated collateral asset

  • Borrow a specific asset

Each Isolated Market operates independently. This isolation enables:

  • More precise risk management

  • Increased flexibility in market parameters

Key Features of Isolated Markets

  1. Asset Specificity: Each market is dedicated to a specific pair of assets - one for collateral and one for borrowing.

    1. For example:

      1. ETH/USDC: Users can use ETH as collateral to borrow USDC.

      2. USDC/ETH: Users can use USDC as collateral to borrow ETH.

  2. Independent Liquidity: Isolated Markets do not share liquidity, allowing for tailored risk profiles.

  3. Customizable Parameters: Each market can have its own set of risk parameters, including its own Collateral Factor, Interest Rate Model (IRM), and Oracle.

  4. Immutable Design: Once deployed, the core parameters (such as the collateral asset, borrowable asset, Collateral Factor, IRM, and oracle) of an Isolated market cannot change. This immutability fosters trust, transparency, and predictability for users, ensuring that the market's rules and conditions remain constant over time.

Benefits of Isolated Markets

  1. Enhanced Risk Management: The isolation of assets allows for more accurate risk assessment and mitigation strategies. By separating high and low-risk assets, Isolated Markets are able to offer higher Collateral Factors for certain assets, optimizing capital utilization without being constrained by the risk profiles of other assets in the pool.

  2. Improved Collateral Security: Unlike the Core Markets, Isolated Markets always allow for the withdrawal of supplied collateral after loan repayment.

  3. Competitive Interest Rates: The specialized nature of each market can lead to more competitive rates by optimizing liquidity and allowing tailored risk assessments for specific asset pairs.

  4. Greater Flexibility: Users can choose markets that best align with their risk tolerance and investment strategy.

Available Isolated Markets

View the list of available Isolated Markets on Moonwell's Markets page. Each Isolated Market is tagged accordingly and displays its collateral asset, borrowable asset, risk parameters (including collateral factor), market utilization, and current interest rates.

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