What is Euler?

Euler v2 is a modular lending platform designed to provide unmatched flexibility and innovation in DeFi lending and borrowing. It features two core components: the Euler Vault Kit (EVK), enabling permissionless creation of customized vaults, and the Ethereum Vault Connector (EVC), which allows interconnected vaults to use assets as collateral across the ecosystem. Euler supports advanced use cases like synthetic assets, leveraged yield farming, and margin trading while offering lower borrowing costs, customizable liquidation flows, and a suite of risk management tools such as sub-accounts and profit/loss simulators.

What are the risks?

Euler’s modular design introduces risks associated with vault governance and collateral management. Governed vaults, while flexible, depend on a privileged account (the governor) to adjust parameters such as loan-to-value ratios and supply/borrow caps, introducing potential vulnerabilities if the governor role is mismanaged. To mitigate this, Euler requires governors to pass a vetting process, including a multisig setup with a timelock. Conversely, ungoverned vaults are immutable and eliminate governance risks but may lack adaptability to evolving market conditions. Additionally, the complexity of vault chaining and reliance on external integrations, such as price oracles and liquidity sources, could expose users to systemic and operational risks.

How you make money on Euler

Euler generates yield through collateralized lending and borrowing activities, powered by its customizable vaults. Passive lenders earn interest by depositing assets into governed or ungoverned vaults, while active traders leverage vault chains for advanced strategies like yield farming, carry trades, and impermanent loss hedging. Builders and vault governors can earn fees through the platform’s reward and fee-sharing mechanisms.