Skip to main content

​
Overview

Morpho Vault V2 allows allocators to move assets between markets within boundaries set by caps. Allocation operations enable efficient capital deployment while maintaining risk controls through absolute and relative caps.

​
Allocation mechanism

Allocators can distribute vault assets to different markets through adapters. Each market is identified by one or more IDs that track allocations and enforce caps.
Only accounts with the allocator role can call allocate() and deallocate() functions. Sentinels can also deallocate assets.

​
Allocating assets

The allocate() function moves assets from the vault to an adapter representing a market: 
function allocate(address adapter, bytes memory data, uint256 assets) external;

​
Allocation process

1

Accrue interest

The vault first accrues any pending interest to update total assets and allocations.
2

Transfer assets

Assets are transferred from the vault to the specified adapter.
3

Update allocations

The adapter returns IDs and the change in allocation, which updates tracked allocations.
4

Check caps

The vault verifies that absolute and relative caps are not exceeded for each ID.

​
Example allocation

// Allocate 1000 assets to an adapter
vault.allocate(adapterAddress, "", 1000);

​
Cap enforcement

Allocations are subject to two types of caps:
  • Absolute cap: Maximum total assets that can be allocated to an ID (in asset units)
  • Relative cap: Maximum allocation as a fraction of total vault assets (in WAD, where 1e18 = 100%)
Allocations will revert if:
  • The absolute cap is zero (prevents interaction with unknown markets)
  • The allocation would exceed the absolute cap
  • The allocation would exceed the relative cap (unless relative cap is WAD)
Source: VaultV2.sol:575-600

​
Deallocating assets

The deallocate() function withdraws assets from an adapter back to the vault: 
function deallocate(address adapter, bytes memory data, uint256 assets) external;

​
Deallocation process

1

Call adapter

The adapter’s deallocate() function is called with the specified data and asset amount.
2

Update allocations

Allocations are decreased based on the IDs and change returned by the adapter.
3

Transfer assets

Assets are transferred from the adapter back to the vault.

​
Example deallocation

// Deallocate 500 assets from an adapter
vault.deallocate(adapterAddress, "", 500);
Deallocations will revert if:
  • The ID’s current allocation is zero
  • The caller is not an allocator or sentinel
  • The adapter is not registered with the vault
Source: VaultV2.sol:602-624

​
Allocation tracking

Allocations are tracked per ID using the Caps struct: 
struct Caps {
    uint256 allocation;      // Current allocated amount
    uint128 absoluteCap;     // Maximum absolute allocation
    uint128 relativeCap;     // Maximum relative allocation (in WAD)
}

​
Viewing allocations

// Get current allocation for an ID
uint256 currentAllocation = vault.allocation(idHash);

// Get absolute cap
uint256 absCap = vault.absoluteCap(idHash);

// Get relative cap
uint256 relCap = vault.relativeCap(idHash);

​
Interest and losses

Allocations are updated when interacting with markets to account for accrued interest or realized losses. The change value returned by adapters includes both the intended allocation change and any interest or losses.

​
Allocation with interest

When allocating to a market that has accrued interest, the allocation increases by both the new assets and the interest: 
// If a market has 1000 allocated with 100 interest accrued
// Allocating 200 more will increase allocation by 300 (200 + 100)
vault.allocate(adapter, "", 200);
// allocation = 1300
Source: AllocateTest.sol:225-269

​
Relative cap protection

Relative caps use firstTotalAssets rather than real-time total assets to prevent flashloan-based cap manipulation:
Depositing and allocating in the same transaction may fail relative cap checks. This is intentional protection against attackers using flashloans to bypass caps.
// This will revert if done in one transaction via multicall
vault.deposit(1000, user);
vault.allocate(adapter, "", 1000);  // May exceed relative cap

// Instead, do this across separate transactions
// Transaction 1:
vault.deposit(1000, user);

// Transaction 2:
vault.allocate(adapter, "", 1000);  // Will succeed
Source: AllocateTest.sol:120-149

​
Access control

  • Allocators: Can call both allocate() and deallocate()
  • Sentinels: Can only call deallocate() (emergency withdrawals)
  • Others: Cannot call these functions
Allocators are set by the curator through timelocked governance. Source: VaultV2.sol:575, 602

Build docs developers (and LLMs) love

Get started for freeTalk to us