A significant challenge in decentralized finance (DeFi) is liquidity fragmentation across isolated lending and borrowing platforms. A solution addresses this issue by enabling permissionless creation of independent vaults. These vaults can leverage assets from any other vault within a broader ecosystem as collateral. This interconnectedness, facilitated by a unique cross-vault communication mechanism, provides enhanced flexibility for various participants. Lenders, borrowers, developers, and traders benefit from this modular design, fostering a potentially more efficient and dynamic financial environment. This system is known as Euler.
What is Euler Finance (EUL)?
Euler Finance is a decentralized, non-custodial protocol built on Ethereum that enables the permissionless lending and borrowing of a wide range of digital assets. It distinguishes itself from traditional DeFi lending platforms through its innovative modular architecture, which allows for the creation of isolated and risk-managed markets. Founded by Michael Bentley and a team of developers from Euler Labs, the project is on a path toward progressive decentralization, guided by its community and supported by the Euler Foundation for real-world operational needs. The protocol has undergone significant evolution, including a major security incident in 2023 that led to reinforced safeguards, and the subsequent launch of its more advanced and flexible V2 in 2024.
How Euler Works
Euler's core functionality is powered by two main components that work in tandem:
The Euler Vault Kit (EVK)
This is a developer toolkit that allows for the creation of customized, standalone lending vaults. Each vault operates as an independent market with its own risk parameters, interest rate model, and oracle for price feeds. The EVK leverages the ERC-4626 tokenized vault standard, ensuring that deposits are represented as shares and can be seamlessly integrated across the broader DeFi ecosystem. Developers can use this kit to build various types of markets, from simple collateral pools to complex, governed lending platforms.
The Ethereum Vault Connector (EVC)
This is the interoperability layer that unlocks Euler's most powerful feature: cross-vault composability. The EVC acts as a secure ledger that tracks users' debt and collateral positions across different vaults. It enables a user to deposit assets as collateral in one vault and then borrow from a completely separate vault, all without having to manually transfer funds. This system maintains risk isolation for each vault while providing users with unprecedented flexibility for complex financial strategies, all executable within a single transaction.
Vault Types
The protocol supports a diverse array of vaults to cater to different user needs and risk profiles:
Collateral-Only Vaults: Designed for borrowers, these vaults accept deposits that can be used to secure loans but do not themselves generate yield from lending.
Governed Vaults: These are actively managed markets where a DAO or a designated curator can adjust key parameters like collateral factors and interest rates to optimize for safety and efficiency.
Ungoverned Vaults: Operating with immutable, pre-set rules, these vaults offer a trust-minimized environment for users who prefer predictable, non-custodial lending.
Yield Aggregator Vaults: These are sophisticated vaults that automatically channel user deposits into various yield-generating strategies, both within Euler and externally, to maximize returns.
What is the EUL Coin?
The EUL token is the governance and utility token at the heart of the Euler ecosystem. Its primary functions are:
Protocol Governance: EUL holders have the right to propose and vote on all major decisions concerning the protocol's development, treasury management, and key parameter changes.
Economic Engine: EUL is integral to the protocol's fee mechanism. Accumulated fees are periodically auctioned off, with EUL as the bidding currency. The EUL used in these auctions is then sent to the DAO treasury, creating a sustainable economic loop.
Incentivization: The protocol uses EUL tokens to reward users for participation, such as providing liquidity or engaging in specific borrowing activities, thereby encouraging growth and network security.
How to Buy Euler (EUL)?
You can access EUL on WEEX. The project's rapid growth and significant trading volumes have made it available across multiple established exchanges, providing investors with multiple avenues for participation.
Currently, WEEX has launched both Spot and Futures trading for the EUL token. You can trade tokens on WEEX for ultra-low fees by following these steps:
Open and log in to the WEEX App or official website.
Search for "EUL" in the search bar and select either Spot or Futures trading.
Choose your order type, enter the quantity and price, and complete your trade.
Conclusion
By introducing a modular and composable architecture, Euler Finance offers a next-generation framework for on-chain credit. Its system of interconnected yet independent vaults directly addresses the issue of liquidity fragmentation, providing lenders, borrowers, and developers with a more flexible and efficient platform. With its robust toolkit and cross-vault functionality, Euler is positioned as a foundational primitive for building a more dynamic and integrated DeFi lending landscape.
