Morpho vaults explained: USDC lending
How Earn uses Morpho vaults to generate USDC yield.
A Morpho vault pools USDC and lends it through Morpho's markets. When you deposit through Earn, your USDC goes into a vault and the vault mints shares to your wallet. As borrowers pay interest, each share is worth more USDC.
Eligibility
Earn's approved set is an on-chain list. A vault joins it only after review, and only if its deposit asset is USDC and it holds at least 5,000 USDC. The wizard suggests a far higher Minimum vault size (TVL), usually 1,000,000 USDC or more.
If a vault you see on Morpho is not selectable in Earn, one of these applies:
- It is not on the approved set.
- Your strategy filters it out: it is below your Minimum vault size (TVL) or your Minimum liquidity to enter, or you hid it.
- It is at its deposit cap.
- It has no APY data yet.
- Your amount is below that chain's minimum. See The walkthrough.
- Its cover type does not match your strategy. A covered strategy holds covered vaults only.
Removal from the approved set blocks new deposits into that vault. It does not trap what is already there: your shares stay in your wallet, and a close still redeems them.
Withdrawable liquidity
Vaults lend most deposits out, so only part of the TVL can be withdrawn at any moment. Earn tracks each vault's withdrawable liquidity and shows it next to TVL with a Liquid % tag: red below 3%, orange below 10%, green at 10% or above.
Auto-Pilot enters a vault only when its withdrawable liquidity clears your Minimum liquidity to enter, and it exits a held vault whose liquidity falls below your Minimum withdrawable liquidity. Vault size works the same way, with Minimum vault size (TVL) and Auto-exit vault size. See Forced exits.
If a vault's withdrawable liquidity falls below the value of your own position, Earn cannot redeem the position in full. It marks the position Holding and waits. See When a vault can't be exited.
The Vaults page lists approved vaults with APY, TVL, liquidity, and approval status. Each vault has a detail page charting APY and withdrawable liquidity over the last 24 hours.
Share price
Share price is all the USDC the vault holds, on loan plus reserves, divided by the shares issued. As borrowers pay interest, holdings grow but the share count does not, so each share is worth more over time. The share price can fall only when a market the vault lends to takes a loss.
Your shares
The vault mints shares to your wallet, not to Earn. You can redeem them on Morpho at any time, up to the vault's withdrawable liquidity, with or without Earn. Earn does not see a redemption made outside the app. The strategy keeps showing the old position, and the next rebalance or close of that vault fails. Close through Earn while a strategy is live. The exception is a Holding position skipped by a close. Redeem that one on Morpho once liquidity returns.
Rewards
Morpho streams MORPHO and partner tokens to depositors. They do not flow through the share price, so they are not in Earn's APY, and Earn ignores them when it ranks vaults. Because the shares are in your wallet, the rewards accrue to you. Claim them with the same wallet on Morpho.
Is a Morpho vault safe?
Every Morpho vault carries smart-contract risk, the risk of bad debt in its lending markets, and curation risk: a curator chooses which markets the vault lends to, and Earn does not review that choice. Earn lists only vaults on its approved set, and it exits a vault whose liquidity or size falls below your floors. The Earn contract is audited. The audit does not cover the vaults. See Security and audits.