The Ethereum Foundation has deployed 3,400 $ETH tokens in Morpho in a move that seemed simple to some, but others wondered why Aave, the largest Ethereum DeFi protocol, never got the green light.
In a discussion thread. thread published on X today, March 18, 2025, the Ethereum Foundation announced that it transferred approximately $7.6 million from $ETH in Morpho’s vaults, with 1,000 $ETH Specifically allocated to Morpho Vaults V2, the latest protocol architecture built around contracts that cannot be upgraded or interfered with by any administrator once deployed.
This move is not an isolated event either. In October 2025, the Foundation had already committed 2,400 $ETH and around $6 million in stablecoins to Morpho, saying it was part of a broader strategy to move away from periodic selling $ETH to finance their operations.
Deployment criteria
In June 2025, the foundation, through Hsiao-Wei Wang, published a treasury policy to establish a framework called “Defipunk”, which is a set of requirements that all future on-chain deployments must meet before the foundation can deploy to it.
Some of the requirements include permissionless access, self-custody, open source licensing, confidentiality, open development processes, and what the document describes as “maximally trustless core logic.”
The policy was also explicit on licensing, stipulating that contracts must use a free open source license (either copyleft, like AGPL, or permissive, like MIT/Apache). However, licenses available at source, such as the Business Source License (or BSL), are not specifically eligible.
Fortunately, Morpho Vaults V2 and Morpho Blue V1 both run under GPL 2.0.
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For immutability, the policy stated that the Foundation would avoid “administrative keys with broad powers” and would instead favor protocols whose “fundamental protocol logic is not scalable or is governed by a highly decentralized, time-locked, and transparent process.”
Morpho also meets this requirement to the extent that the main contracts of its V2 are completely immutable once deployed, with no possibility of administrative exemption of any kind.
The policy also named specific models in the current DeFi space that it would not support.
Apparently, the policy would not accept “backdoor shutdown mechanisms or fund mining functions, excessive reliance on multisigs or MPC, widespread use of whitelists, centralized and monitored user interfaces.”
He also said these models “leave DeFi markets and participants exposed to systemic vulnerabilities.”
Why didn’t the Ethereum Foundation choose Aave?
The Ethereum Foundation did not mention Aave anywhere in its message today or in the June 2025 policy document. However, for skeptics, it is hard not to read terminologies about admin keys, backdoor mining functions, and failures in governance transparency without drawing parallels to the crisis that has publicly rocked Aave since December 2025.
Apparently, swap revenue from Aave’s CoW Swap integration was found in a wallet controlled by Aave Labs (instead of DAO treasury). Marc Zeller, founder of the Aave Chan Initiative and its most influential governance delegate, put the figure at around $51 million in unapproved fees after releasing an audit of Aave Labs’ historic funding on February 25.
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BGD Labs, the company responsible for building and maintaining Aave V3, also announced on February 20 that it would not renew its contract after April 1 due to centralization issues and Aave Labs’ apparent attacks on V3 to promote V4.
The governance crisis came to a head on March 1, when the “Aave Will Win” funding proposal (requesting up to $42.5 million in stablecoins and 75,000 AAVE tokens) was passed. Checking the temperature With a narrow approval of 52.58%.
Zeller immediately contested the result, alleging that 233,000 votes from Aave Labs-related clusters (including 111,000 tokens delegated by co-founder Stani Kulechov) had decided the outcome, and that removing these votes would have revealed a clear rejection.
Two days later, the Aave Chan Initiative announcement he left the project completely.
What does this mean for Morpho?
Morpho is now the only DeFi protocol that the Ethereum Foundation has invested in twice as part of its current treasury strategy. With a total value locked (TVL) of $5.8 billion, the approval comes at a time when Morpho is already starting to build institutional momentum.
In less than eight months, Coinbase has surpassed $1 billion in Bitcoin-backed loans through the protocol. Additionally, Apollo Global Management has also agreed to purchase up to 90 million MORPHO tokens over four years through its partnership with the Morpho Association.
Nonetheless, the Ethereum Foundation’s policy simply emphasizes that aside from financial gain, the deployments themselves signal the type of technical approaches and governance models that the foundation considers sustainable.
