Bankless · Wednesday, July 29, 2026
Morpho Midnight is positioned to become a machine for pricing trust assumptions on-chain, potentially enabling undercollateralized loans by allowing borrowers to express trustworthiness beyond just collateral. This could foster the emergence of an on-chain identity layer by linking credit history and repayment behavior to addresses.
“What I'm most excited about is actually not the price discovery of the rate of the given stable coin, but more of the underlying trust assumption. What do I mean by this? Is that when you come to Morphe as a borrower to borrow something, you have to prove yourself, right, to get the financing. So usually you come with a big stash of Bitcoin or a big stash of collateral. But Midnight lets you extend this to more than that if you want to.”
“So there's a module in the protocol that lets you express why you should be trusted. So that could be collateral, but that could also be your identity or that could be your, you know, receivables, whatever. And then the curators will be able to see this and then price it, right?”
“And I think, by the way, I think this is the answer to underclutch license. I think this will come back. I see how that would work. It is, right? That's exciting, right? Yeah, absolutely. Yeah. Because it's like, what you're also doing is like, if somebody like Apple, the company Apple, for example, wanted to get a line of credit, it's... It's on them to provide enough material to create trust in the market.”
“I think MorphoMidnight is going to be the first PMF of the identity layer. The identity layer had a PMF problem because there was no business case. But now the business case is going to be very clear is that your cost of capital is going to be a few bits lower if you provide that identity primitive. Hence, there's like a clear value that you can achieve by having your identity on-chain.”