Euler is a permissionless money market protocol that allows users to lend and borrow almost any crypto asset.
Euler is a permissionless money market protocol that is designed to serve the exotic, long-tail end of the market. On Euler, every token with an ETH liquidity pair on Uniswap V3 can be listed and made available for borrowing and lending. The protocol is able to achieve this through its asset tier system, which aims to mitigate the potential spillover effects of liquidations by classifying assets by their respective risk profiles. There are three asset tiers: isolation-tier, cross-tier, and collateral-tier assets. Isolation-tier assets can't be used as collateral nor can they be borrowed from the same account alongside any other assets. Cross-tier assets can't be used as collateral, but they can be borrowed alongside other assets. Lastly, collateral-tier assets are the only assets that can be used as collateral. By isolating the riskiest assets and restricting their use as collateral. Euler can allow permisionless listings without endagering the entire platform. Permissioned lending protocols like Aave and Compound can't achieve this because a potential liquidation cascade in one market could spill over to other, and ultimately leave the protocol with bad debt. Users who deposit on Euler receive eTokens in return that represent your share of the underlying asset and accrued interest. Borrowers on the platform receive dTokens that represent the user's amount of debt.
Euler charges a reserve factor similar to Compound and AAVE that allocates a share of borrowers' fees to the protocol. Each supported asset has a reserve factor based on the asset's individual risk that determines how much goes into the reserve. These fees are controlled by governance and may be paid out to EUL holders, used to compensate lenders if pools become insolvent, or other protocol uses.
You earn lending fees on Euler by depositing your idle crypto assets to be used by borrowers looking for leverage.