Morpho Vaults V2 introduces in-kind redemptions, an emergency exit mechanism that lets users escape illiquid vaults by swapping shares for direct market positions using flashloans.
In permissionless markets, oracle choice is critical. The xUSD/USDC depeg on Morpho Arbitrum shows what happens when oracles fail - no liquidations trigger, utilization hits 100%, and withdrawals stall.
Morpho uses an adaptive interest rate model that dynamically adjusts rates based on supply and demand to maintain optimal market utilization and balance between lenders and borrowers.