Introduction: DeFi's Mid-Life Crisis?
Since the second half of 2024, the DeFi credit sector has seen a notable shift as multiple leading protocols have begun adjusting their governance structures. This shift, away from purely DAO governance towards more flexible hybrid models, is driven by the industry grappling with institutionalization, regulatory pressures, and efficiency bottlenecks.
Morpho's MetaMorpho Curator System launched in 2024, Aave's attempt at institution-specific markets, and Compound's discussions around treasury all point to a common direction: the traditional 'one-person-one-vote' governance model is revealing its limitations in the face of rapidly changing market demands.
This article aims to answer a central question: How should DeFi credit protocols balance the ideals of decentralization with commercial efficiency? We'll conduct a comparative analysis of strategic adjustments made by several protocols between 2024 and 2025, focusing on the Permissionless model launched by Gearbox Protocol in March 2025, and comparing it with the practices of Morpho, Aave, and Compound.
The Chronic Ailments of DAO Governance
Over the past year, the on-chain credit market has undergone a profound identity crisis. While the narrative of 2020-2022 was 'permissionless financial democratization,' by 2024, as traditional financial institutions like Coinbase and BlackRock began venturing into on-chain credit, the industry suddenly found itself facing a new challenge: how to serve institutional clients while upholding decentralization ideals. This dilemma manifested most directly in the collapse of governance efficiency.
For example, a Compound proposal regarding the addition of a new collateral type took over 8 weeks from discussion to final approval in 2024. While Aave has improved this through a fast-track approval channel (Snapshot voting), the fundamental problem remains: when a protocol needs to serve 50 different user groups with varying risk preferences, the DAO's 'please everyone' logic inevitably leads to 'slow down'.
Another underestimated challenge is regulatory adaptation. The industry has realized that 'pure decentralization' is neither a shield against regulatory exemptions nor conducive to collaboration with traditional financial institutions. Institutional funds require clear responsibility bodies, clear risk management processes, and auditable decision records, which are weaknesses of traditional DAO governance.
In this context, a wave of 'governance model re-engineering' emerged in 2024. Morpho pioneered with MetaMorpho, allowing specialized teams to create vaults and manage risk parameters independently. Aave launched the Aave Arc program to offer institution-specific KYC markets. Euler introduced the Ethereum Vault Connector (EVC) for more modular risk isolation. The common thread among these attempts is: delegating operational decision-making for specific markets to specialized teams while maintaining decentralization at the protocol level.
The 'Species Catalog' of Four Governance Models
Compound: The Staunch Conservatives
Compound still insists on full on-chain governance, where any parameter adjustments require a proposal, voting, and time-lock. While this model offers high transparency and strong community participation, it comes at the cost of long decision-making cycles (typically 2-4 weeks) and difficulty in responding quickly to market changes. In 2024, Compound's total market count increased from just 32 to 41, a significantly slower expansion than its competitors. However, to be fair, Compound positions itself as 'robustness first,' and its 3-year zero bad debt record proves the risk management advantages of this model. In an industry universally pursuing speed, Compound is like an old brewer insisting on manual methods—slow, but reliable.
Morpho: The Radical Delegators
Morpho's MetaMorpho system may be the most radical delegation attempt to date. The protocol itself is only responsible for the underlying lending logic and liquidation mechanisms, while market creation, asset selection, and risk parameters are entirely determined by curators. This has led to astonishing expansion: Morpho added over 200 markets in 2024, and its TVL increased from $800 million to $2.8 billion (a 250% increase). However, the problem is also clear: as of May 2025, Morpho's top 10 curators controlled over 65% of TVL, posing significant centralization risks. More concerning is that some curators, in pursuit of high yields, have begun accepting less liquid collateral, accumulating potential risks. Morpho is like handing the steering wheel to the co-pilot, taking responsibility only for hitting the brakes—assuming the braking system is sensitive enough.
Aave: The Straddling Balancers
Aave has taken a relatively moderate path: its main pool is still tightly managed by the DAO, but it offers customized markets for institutional clients through Aave Arc. The advantage of this 'dual-track system' is that it retains the decentralized foundation while flexibly serving institutional needs. However, operational complexity increases significantly: Aave's development costs increased by 40% year-on-year in 2024, and the growth of the Arc Market was far below expectations (TVL accounting for only 8% of the total). One key reason is that institutional clients found that Arc's admission requirements (KYC), while meeting compliance requirements, did not offer a clear advantage in terms of interest rates, leading to insufficient appeal. Aave is like a rider trying to ride two horses at the same time, theoretically possible but extremely tiring in practice.
Compound V3: The Tinkerer's Attempt
Compound V3 attempted to make improvements within the traditional DAO framework, introducing a 'fast-track proposal' mechanism: for low-risk parameter adjustments (such as minor interest rate tweaks), a simplified process can be followed, reducing approval time from 4 weeks to 1 week. This has alleviated efficiency problems to some extent, but it has not fundamentally broken out of the DAO framework, and the practice of 2024 proves that its market expansion speed is still limited. Through comparison, a consensus is emerging in the industry: pure DAO governance is difficult to adapt to the current market rhythm, but completely abandoning decentralization will raise new problems. The key lies in finding an appropriate 'delegation boundary'—what decisions must be retained at the DAO level (such as core protocol parameters and economic model) and what can be delegated to specialized teams (such as risk management in specific markets).
Gearbox's 'Speed and Passion'
The Permissionless model launched by Gearbox in March 2025 can, to some extent, be seen as a variant of the Morpho Curator model, but with more constraint mechanisms. The core logic is: the protocol level provides the standardized lending and leverage infrastructure, and curators are responsible for creating specific markets and managing risk parameters, but curators must bear the first loss themselves (through staking mechanisms), and their operations are subject to on-chain transparency. From a data perspective, this model has achieved remarkable success initially. From March to August 2025, Gearbox's TVL grew from $105 million to $329 million, a growth rate of 213%. Particularly noteworthy is the Lido dedicated pool, as the first case where the Permissionless model is applied on a large scale, its TVL grew from $72 million to $296 million. This growth is truly remarkable in the current market environment—for comparison, Aave's overall TVL growth rate during the same period was 45%, Compound's was 31%, and Morpho's was 89%. But the more interesting comparison is the speed of expansion. Gearbox deployed 42 new markets in 3 months, covering 5 chains, while it deployed only 41 markets in the entire year of 2024. This acceleration is driven by the decision-making efficiency brought by the curator model: each market no longer needs to go through the DAO proposal process, and curators can move quickly according to market opportunities. In comparison, Compound's average new market launch cycle in 2024 was 3.2 weeks, Aave's was 2.1 weeks, while Gearbox shortened this cycle to an average of 5 days through the Permissionless model. However, rapid expansion also raises questions. Gearbox currently has 'activated' deployment capabilities on 28 EVM chains, but it is actually operating on only 9 chains. While this 'wide-spread' strategy reduces operating costs, it also means that a significant amount of liquidity is scattered. For example, although the Plasma Pool's TVL reaches $80 million, it is distributed across 4 different chains, and the liquidity depth of a single chain is not high in reality. This is similar to the problem faced by Morpho: excessive market fragmentation may reduce capital efficiency. Another metric worth paying attention to is the quality of curators. The 5 curators that Gearbox is currently collaborating with, including Invariant Group, Re7, Maven11, etc., have aggregate managed assets of over US$1.5 billion, and 4 of them are among the top 15 curators in DeFi. This certainly reflects a certain level of institutionalization, but comparing it to Morpho will reveal a gap: Morpho's curator ecosystem includes more than 30 specialized institutions such as Gauntlet, Steakhouse Financial, and Block Analitica, with total managed assets of over US$5 billion. The breadth and depth of the curator ecosystem directly determines the model's ability to resist risks. Risk testing is another crucial dimension. Gearbox officially emphasizes that it achieved zero bad debt on October 10, 2024 under extreme market volatility, which is certainly a positive sign. However, it should be noted that the extent of this extreme test is relatively limited (ETH fell by 12% in a single day), and the real stress test should refer to the Terra collapse in May 2022 or the 312 black swan in March 2020. For comparison, Aave experienced approximately $5
EN
