Feature Overview
This page summarises the core concepts behind Isolated Markets so you can understand what you are interacting with before following the step-by-step guides. Isolated Markets are powered by Morpho; many of the concepts below are documented in more depth in the Morpho documentation, and we link out where it helps.
What is an isolated market?
Unlike a pooled money market such as SparkLend, where many assets share common liquidity pools, an isolated market is a single collateral/loan pair that stands entirely on its own. A market named WETH / USDC, for example, lets you supply WETH as collateral and borrow USDC against it — nothing else.
Each market is defined by five parameters that are fixed at creation and are immutable:
| Parameter | What it means | Shown in app as |
|---|---|---|
| Collateral token | The asset you supply to back a loan | Collateral asset |
| Loan token | The asset you borrow | Loan asset |
| Oracle | The price feed valuing collateral against the loan asset | Oracle / Oracle Price |
| LLTV | Liquidation loan-to-value — the borrowing limit before liquidation | Max LTV |
| IRM | Interest Rate Model — sets rates from utilization | Interest Rate Model |
Because these can never change, the terms you borrow under are fixed for the life of your position.
Isolation of risk
Every market is independent. Your collateral in one market is never lent out, re-priced, or exposed to bad debt from any other market. If a single market runs into trouble, only suppliers of that one market's loan asset are affected — the issue cannot cascade into other markets or into SparkLend. This is the core safety property of the isolated-market design.
Borrowing power, LLTV and the Health Factor
The amount you can borrow is bounded by the market's LLTV (shown as Max LTV). If a market's LLTV is 86%, then for every $100 of collateral value you can borrow up to $86 of the loan asset.
Each position has a Health Factor that compares your collateral value (adjusted by the LLTV) to your debt:
- A Health Factor above 1 means your position is safe.
- A Health Factor below 1 means your position can be liquidated.
As collateral prices move and interest accrues, your Health Factor changes. Keeping a comfortable margin above 1 reduces liquidation risk. See Liquidations.
Liquidity and the Public Allocator
Markets are funded by suppliers of the loan asset, and additionally by Morpho vaults run by professional curators. A market can draw extra liquidity on demand from other Morpho markets through the Public Allocator — in the same borrow transaction — which lets a market run at high utilization while still offering large borrows.
This is why a market can show much more Total Liquidity than the funds sitting directly in it, and why you can sometimes borrow more than the immediately available "Market Liquidity." The Liquidity & the Public Allocator guide explains this in detail.
Where to go next
For step-by-step workflows, see:
- Overview of Markets — browse markets and read a market's details.
- Supplying Collateral — supply your collateral asset.
- Borrowing Assets — borrow the loan asset against your collateral.
- Liquidity & the Public Allocator — how large borrows are sourced.