# How Your Funds Are Managed

Vault allocation, Morpho Protocol, and how unflat works behind the scenes.

## Where your money goes

When you deposit into unflat, your funds are allocated to curated vaults on Morpho Protocol, a decentralized lending protocol that enables optimized lending positions with overcollateralized borrowing.

Your funds are not held by unflat. They move directly from your wallet into the protocol.

## What is Morpho Protocol?

Morpho is one of the most established DeFi lending markets, with over $5B in managed assets and zero security exploits to date. Unlike traditional lending pools where all deposits share one interest rate, Morpho enables more granular matching between lenders and borrowers, often resulting in better rates for both sides.

Key facts about Morpho:

* **$5B+** in managed assets
* **Zero exploits** since launch
* **Audited** smart contracts by leading security firms
* **Used by institutions** and individual lenders alike

## How unflat selects vaults

Not all Morpho vaults are created equal. unflat selects vaults based on strict criteria:

### Collateralization requirements

Only vaults where borrowers must overcollateralize, ensuring lender protection through automated liquidation mechanisms.

### Liquidity depth

Sufficient liquidity to ensure withdrawals are always possible without delays or friction.

### Audit status

Smart contracts must be audited by reputable security firms before unflat allocates any funds.

### Track record

Historical performance, operational reliability, and risk metrics are assessed before allocation.

## Current stablecoin: USDC

unflat currently operates with USDC (USD Coin), a stablecoin issued by Circle and pegged 1:1 to the US dollar. USDC is backed by cash and short-term US treasuries, and is one of the most widely used stablecoins in DeFi.

For European users depositing from EUR, this means converting to USDC first, which introduces EUR/USD exchange rate risk.

{% hint style="info" %}
**EURC roadmap.** As euro-denominated stablecoin (EURC) vault liquidity grows on Morpho, unflat will add EURC support, eliminating FX risk for European users and completing the fully euro-native experience. This is a core part of unflat's vision.
{% endhint %}

## Non-custodial architecture

unflat never holds your funds. Your deposit goes directly from your wallet to the Morpho vault. You retain ownership of your wallet and can verify the position on-chain at any time.

This is fundamentally different from a bank, where you hand over your money and trust the institution to manage it responsibly behind closed doors.


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://unflat.gitbook.io/unflat-docs/basics/how-your-funds-are-managed.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.