Robinhood‘s decision to build its new Earn product on Morpho put an open onchain credit network behind one of the best-known retail investing brands in the United States. Rather than build proprietary lending infrastructure, Robinhood plugged into a network on which lenders and borrowers already compete for capital.

Morpho describes itself as an open credit network with more than $14 billion in deposits, and its infrastructure is already used by Coinbase, Bitwise Asset Management and Societe Generale. Paul Frambot, its chief executive and co-founder, answered The Fintech Times‘ written questions on what the Robinhood deal signals, how the product is put together and how risk is handled for a mainstream audience.

For Frambot, the choice is a statement about how serious platforms now approach onchain credit. “It signals the value of open infrastructure,” he says. Morpho is permissionless and, he argues, increasingly easy for companies such as Robinhood to integrate, while the credit network underneath is open by design. Lenders and borrowers compete in that network in real time, which creates more efficient markets, “and that competition is what ultimately delivers better rates, better terms and better outcomes for end-users”.

“Robinhood choosing to plug into that network rather than build its own closed version is a strong signal that open infrastructure, not proprietary stacks, is becoming the default way serious platforms approach onchain credit,” he says.

How Earn works

The mechanics start with the customer. When a user deposits into Robinhood Earn, a personal noncustodial wallet is created for them, so they keep control of their own assets throughout. That balance flows into what Morpho calls a Morpho Vault, “a programmable, noncustodial strategy that allocates capital across chosen credit markets on Morpho according to rules set in advance by a curator”.

The funds are made available to borrowers, and the interest flows back to Earn users as yield. Because the whole process runs on open, always-on infrastructure, Frambot says, users can withdraw at will, “with no lock-up and no delay”.

Three other names sit inside the product. USDG is the dollar-pegged stablecoin that lets customer balances move and earn onchain, “effectively functioning as a digital dollar”. Steakhouse Financial acts as the vault curator, which Frambot describes as “sitting at the centre of the risk management process: setting risk parameters and eligibility criteria, determining which Morpho Markets deposits are allocated to, and managing that credit risk on an ongoing basis”. Robinhood Chain provides the settlement layer and handles the transactions involved in the flow.

“That structure matters because each layer of the product is handled by the specialist best placed to deliver it: Morpho provides the open credit network, Steakhouse manages risk and allocation, Robinhood Chain handles settlement, and Robinhood owns the consumer experience,” he says. It also means the components can evolve independently, so the product benefits from improvements at each layer without the whole stack being rebuilt.

Risk for a retail audience

Asked how he thinks about risk for a mainstream retail audience, Frambot does not argue it away. “All financial products carry risk, and as an industry we should be transparent about that rather than gloss over it,” he says. Morpho’s role in the product is as a technology and infrastructure provider. “Our role is to give integrators like Robinhood the tools and configuration options to manage risk appropriately for their own customer base, not to make risk disappear.”

Robinhood has added its own layer of protection. According to Frambot, it maintains an insurance policy underwritten by Lloyd’s of London and Relm that covers certain technical failures and security incidents, including cyber incidents and smart contract exploits. That combination of transparent, configurable infrastructure and integrator-level protections is, he says, “what it looks like to bring this technology to a mainstream retail audience responsibly”.

Where the new capital goes

Morpho recently raised $175 million in a round co-led by Paradigm, a16z crypto and Ribbit, with participation from Apollo Funds, Circle Ventures, VanEck and other strategic investors. The money, Frambot says, “will primarily serve to scale our team as we continue to build out a world-class go-to-market function that can help bring Morpho’s infrastructure to more of the world”. He adds: “We are in active conversations with a number of large-scale fintechs and traditional financial institutions who are seriously exploring onchain credit solutions built on Morpho”.

Coinbase, Bitwise Asset Management and Societe Generale already build on Morpho, so what changes when the integrator is a retail platform of Robinhood’s size? “At the protocol level, not much changes,” Frambot says. Morpho was designed to support any business that wants to integrate an open credit network, and he says it is built to perform just as well for a platform at Robinhood’s scale as for anyone else.

On the longer view, he declines to put a figure on a five-year horizon, because adoption speed “depends on a lot of moving parts, from regulation to consumer familiarity with onchain products”. Extend the horizon to 20 years or more, however, and his expectation is sweeping: “we expect the entirety of finance to run on onchain networks”.

“Stablecoins made money digital; vaults and open credit networks are what will make that money productive, and in time, running on this kind of infrastructure will be unremarkable rather than a frontier bet,” he says.

The post Why Robinhood Built Earn on Morpho: Paul Frambot Explains appeared first on The Fintech Times.