$320K Bought, $36 Million Liquidated: No Hack, No Depeg — How Morpho Got "Legally" Drained

An advanced automated <a href="https://crypto-bible.com/en/glossary/exchanges/market-maker/" target="_blank" rel="noopener">Market Maker</a> design letting liquidity providers choose to concentrate capital within a specific price range, rather than spreading it across the entire price range (from zero to infinity) as in a traditional AMM — substantially improving capital efficiency.

The value gap that arises when the price ratio of two tokens in a liquidity pool diverges, causing a liquidity provider's pooled assets to be worth less than if they had simply held the tokens.

A protocol, through an additional funding source (such as its own issued native <a href="https://claude-me.com/en/glossary/core-concepts/token/" target="_blank" rel="noopener">Token</a>, or the protocol's own reserve assets), actively absorbs the <a href="/en/glossary/amm-liquidity/impermanent-loss/">Impermanent Loss</a> a liquidity provider would otherwise bear, letting the provider recover a value close to or equivalent to simply holding these assets without depositing them in the pool upon withdrawal — shifting the impermanent loss risk covered in an earlier article from the individual provider onto the protocol as a whole.