Deep Dive | Euler | The Lending Super App

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Today edition is focused on a Deep Dive report of Euler Finance, which is a modular lending protocol on Ethereum and multiple other blockchains. Let’s dive in.

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Executive Summary

Euler Finance is a modular, permissionless lending protocol on Ethereum that enables users to lend, borrow, and build custom financial products without limits. Launched in December 2021, Euler has rapidly evolved into a leading DeFi lending platform, distinguished by its innovative vault-based architecture and advanced risk management tools. 

The protocol’s total value locked (TVL) reached about $800M as of May 2025, reflecting strong adoption and resilience following a $200M hack in 2023. Euler’s unique features, such as permissionless market creation, Fee Flow for fee conversion, and Reward Streams for permissionless rewards, set it apart from competitors like Aave and Compound. 

With a robust governance model driven by its native EUL token, a talented team led by co-founders with strong academic and technical backgrounds, and backing from strategic investors like Paradigm and Coinbase Ventures, Euler Finance is well-positioned to capture significant market share in the ever-evolving DeFi landscape.

About the Project

Vision: 

Euler Finance aims to revolutionize DeFi lending by providing a modular, permissionless platform that enables users to lend, borrow, and build custom financial products without limits. Its vision is to become the primary liquidity layer for DeFi, addressing liquidity fragmentation and enhancing capital efficiency across the ecosystem. 

Problem:

Traditional DeFi lending protocols like Aave and Compound offer standardized lending markets with limited customization. This rigidity can hinder innovation and fail to meet the diverse needs of DeFi users and developers, particularly when dealing with long-tail assets or complex financial strategies.

Solutions:

Euler introduces a vault-based architecture using ERC-4626 standards, allowing for the creation of isolated, customizable lending markets. Through the Euler Vault Kit (EVK), developers can deploy their own lending protocols with specific assets, interest models, and risk parameters. The Ethereum Vault Connector (EVC) enables vault interoperability and supports complex financial products like stablecoins, yield aggregators, and margin trading.

This modular design provides flexibility and enhances security and risk management, as each vault can be governed independently or remain ungoverned. Euler’s permissionless nature ensures that anyone can create and participate in lending markets, fostering innovation and inclusivity in DeFi.

Market Analysis

Euler Finance operates within the Decentralized Finance (DeFi) lending sector, a critical component of the broader DeFi ecosystem that facilitates lending and borrowing of cryptocurrencies without intermediaries. The broader DeFi market, which includes lending as a dominant segment, was valued at $20.48B in 2024 and is projected to grow at a CAGR of 53.7% from 2025 to 2030, as per Grand View Research. 

Within lending, stablecoin vaults on platforms like Aave, Sky, Ethena, and Compound have seen their supply-side deposits grow from $4B to $15B over the past 12 months, indicating a strong institutional comfort with DeFi infrastructure. 

Competition: 

• Aave: A leading DeFi lending protocol offering variable and stable interest rates across 16 blockchains. It introduced flash loans, allowing borrowing without collateral if repaid within the same transaction. Aave’s standardized liquidity pool model contrasts Euler’s permissionless vault system, limiting customization but offering broad accessibility and stability. 

• Morpho: Morpho optimizes lending markets like Aave and Compound by introducing curated vaults managed by experts to maximize yields. It operates on 14 blockchains and focuses on efficiency. Unlike Euler’s fully permissionless market creation, Morpho enhances existing protocols, relying on curation rather than enabling entirely new markets. 

• Compound: An algorithmic interest rate protocol allowing users to lend and borrow ERC-20 tokens. Its governance token (COMP) enables community decision-making. Compound’s standardized, less flexible model contrasts with Euler’s modular approach, catering to users seeking simplicity. 

Features

• Modular Vault Architecture: Utilizes ERC-4626-compliant smart contracts via the Euler Vault Kit (EVK) to create isolated lending markets with customizable assets, interest models, and governance rules, enabling tailored financial products. 

• Permissionless Market Creation: Allows anyone to deploy lending markets without restrictions, fostering innovation and supporting long-tail assets, unlike the curated asset lists of competitors. 

• Ethereum Vault Connector (EVC): Middleware that enables cross-vault operations, allowing users to manage borrowing and collateral positions across multiple vaults from a single wallet, optimizing gas efficiency and flexibility. 

• Euler Price Oracle (EPO): A modular pricing system that integrates with Chainlink, Uniswap, and other DEXes, supporting custom quote currencies and a failover mechanism to ensure accurate asset pricing. 

• Fee Flow Mechanism: Employs MEV-resistant reverse Dutch auctions to convert protocol fees into a unified token, enhancing liquidity and benefiting the Euler DAO. 

• Reward Stream: A permissionless reward distribution system based on a proportional allocation algorithm, enabling users to earn rewards without staking, even while borrowing or lending. 

• Synthetic Assets and Cross-Collateralization: Supports the creation of synthetic assets and allows borrowing against multiple collateral types, enhancing capital efficiency and enabling complex financial strategies. 

Token

The EUL token is Euler Finance's native governance token, with a total supply of 27,182,818 tokens. EUL holders can vote on protocol upgrades, parameter changes, and treasury management.

EUl can be accumulated through Fee Flow auctions, where protocol fees are converted into EUL or other assets. Users can also earn EUL through Reward Stream, a permissionless reward distribution system that allows earning while borrowing or lending. 

The EUL token is crucial in aligning incentives within the Euler ecosystem and encouraging participation and governance engagement. As of May 2025, the circulating supply is approximately 18,685,530, with a market cap of $142M and FDV of $207M, as per CoinGecko. 

Traction

Euler Finance has demonstrated remarkable growth and adoption since the launch of Euler V2 in September 2024. As of May 2025, the protocol has achieved a TVL of approximately $800M. Euler has expanded to multiple blockchain networks, including Avalanche, Berachain, and Sonic. These metrics position Euler as a leading and rapidly growing lending protocol in DeFi. 

Team

A team of experienced professionals with diverse academic, finance, and technology backgrounds leads Euler Finance. The co-founders are:

• Michael Bentley (CEO): A former evolutionary biologist from the University of Oxford, Michael has applied game theory and complex systems modeling to financial systems. His academic rigor and mathematical expertise are instrumental in designing Euler’s sophisticated protocol. 

• Doug Hoyte (Blockchain Developer): With a focus on network security and financial applications, Doug brings critical technical skills to ensure the protocol’s robustness and security. 

• Jack Prior (Full-Stack Developer): With over 11 years of experience in web development, Jack contributes to the user-friendly interface and seamless integration of Euler’s platform. 

The broader Euler Labs team consists of developers and quantitative analysts dedicated to pushing the boundaries of DeFi innovation. Their collective expertise ensures that Euler remains at the forefront of decentralized lending technology. 

Investors

Euler has raised a total of $40.8M in three funding rounds. The first was a $800k Seed round in December 2020 from CMT Digital, Divergence Ventures, Lemniscap, and others. The second was a $8M Series A in August 2021 led by Paradigm, and participated in by the previous round investors. The third and final round was a $32M in June 2022, led by Huan Ventures, and participated in by Coinbase Ventures, Jump Crypto, Jane Street Capital, and Uniswap Labs Ventures.

Conclusion

Euler Finance represents a significant advancement in the DeFi lending landscape. It offers a modular, permissionless platform that caters to the diverse needs of users and developers. Its ability to support custom lending markets, advanced risk management, and multi-chain deployment positions it as a leader in DeFi innovation. 

Euler is well-positioned for continued growth with a robust token utility, strong traction metrics, and a talented team. However, the 2023 hack highlights the need for due diligence. As the DeFi space continues to evolve, Euler’s flexible architecture and community-driven governance make it one of the most promising projects in the ecosystem. 

That’s all for today, people. Let’s talk tomorrow.

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