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Dynamo Finance is built on Morpho’s immutable lending infrastructure. Here is how the entire system works from the moment you connect your wallet.

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The big picture

Your wallet
    │
    ▼
Dynamo Finance app  ←── Advanced tools, automation, rewards, Dynamo token
    │                    SubDAO governance (aggregated voting power → Morpho)
    │                    Dynamo community-curated vaults
    │
    ▼
Morpho smart contracts  ←── Immutable, audited lending protocol
    │
    ├── Lending Markets  (supply / borrow pools per asset pair)
    └── Vaults           (auto-allocating yield strategies)
When you interact with Dynamo, your transactions go directly to Morpho’s smart contracts on-chain. Dynamo is the interface, feature, and governance layer that makes this experience more powerful and easier to use.
Dynamo is not just a UI, it is a SubDAO with real governance power in the Morpho ecosystem. The Dynamo layer aggregates its community’s voting power and steers Morpho governance on their behalf, while also running its own community-curated vaults and reward programs.

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Step 1 — Connect your wallet

No account, email, or KYC required. Go to dynamo.finance, click Connect wallet, and approve the connection request in your wallet. Your wallet address is your identity on the protocol. Dynamo reads your on-chain balances and positions in real time.
Connecting your wallet does not grant Dynamo any permissions to move your funds. It only allows the app to read your balances.

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Step 2 — Supplying assets (lending)

When you supply an asset to a lending market:
1

Choose a market

Browse the Markets tab. Each market is dedicated to a single collateral and a single loan asset (e.g., USDC, ETH, wBTC). Check the current Supply APY, utilization rate, and available liquidity.
2

Approve the token

When interacting with a market, you sign a token approval transaction. This allows the Morpho contract to accept that token from your wallet.
3

Deposit

Confirm the deposit transaction. Your assets enter the Morpho lending pool, and you begin earning interest immediately. You receive an on-chain representation of your position (a balance tracked by the smart contract).
4

Earn interest

Interest accrues in real time, paid by borrowers in the same market. Your balance increases continuously, no manual claiming required.
Interest rate mechanics: Rates are set algorithmically based on utilization, the share of supplied assets currently being borrowed. Higher utilization = higher supply APY to attract more liquidity.

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Step 3 — Borrowing

To borrow on Dynamo, you must first supply collateral:
1

Post collateral

Deposit an asset into a market as collateral. The market’s loan-to-value (LTV) ratio determines how much you can borrow against it.
2

Borrow

Draw up to your LLTV limit in the loan asset. Your borrow position accrues interest over time.
3

Monitor your health factor

The health factor measures how safely collateralized your position is. A health factor above 1.0 means you are safe. As it approaches 1.0, you risk liquidation.
4

Repay

Repay your loan at any time by returning the borrowed amount plus accrued interest. Once repaid, your collateral is released.
If your health factor drops to 1.0 or below, your position may be liquidated. Liquidators repay part of your debt in exchange for a portion of your collateral at a discount. Monitor your position regularly.

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Step 4 — Vaults (automated yield)

Vaults are the simplest way to earn on Dynamo:
1

Choose a vault

Browse the Vaults tab. Each vault targets a specific asset (e.g., USDC Vault, ETH Vault) and shows current APY, total deposits, and the markets it allocates to.
2

Deposit

Enter your deposit amount and confirm. You receive vault shares representing your proportional stake in the pool.
3

Dynamo vaults rebalance automatically

The community vault strategy continuously monitors all Morpho markets and reallocates your funds to maintain the highest blended yield. No action required from you.
4

Withdraw anytime

Redeem your vault shares for the underlying asset at any time. No lock-up period, as long as the underlying markets have available liquidity.

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How Morpho markets stay solvent

Morpho uses a liquidation mechanism to keep markets healthy:
  • A liquidation threshold (higher than LTV) defines the point at which a position becomes eligible for liquidation.
  • Liquidators are external actors who monitor positions. When a position’s health factor hits 1.0, they can repay part of the debt and receive the borrower’s collateral at a discount.
  • This incentive ensures bad debt does not accumulate, protecting all suppliers in the market.

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Interest accrual

  • Suppliers earn interest continuously. You never need to manually claim, your balance simply grows.
  • Borrowers owe interest continuously. Your debt increases over time if not repaid.
  • Vault depositors earn a blended rate across all the markets the vault is deployed in, compounded automatically.

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Gas and transaction costs

Every action on Dynamo (deposit, borrow, repay, withdraw) is an on-chain transaction that requires a small gas fee paid in the network’s native token (e.g., ETH on Ethereum). Gas costs vary by network.
On lower-fee networks (e.g., Base, Optimism), gas costs are a fraction of Ethereum mainnet. See Supported Networks for a breakdown.