Euler is a non-custodial, permissionless protocol that allows users to lend and borrow a range of digital assets. EUL is the network’s native governance token. It can be used to vote on a range of features including the setting of risk-minded asset tiers and collateral requirements as well as interest rate parameters, among other key constructs.

Euler facilitates lending and borrowing services across its platform by way of a suite of user-funded liquidity pools that it leverages, similar to other DeFi projects, such as AAVE and Compound.

However, unlike these aforementioned protocols, which adhere to permissioned listing systems that effectively work to shield borrowers from low-liquidity tokens, Euler maintains a truly permissionless network that enables its users to determine what assets are listed on the platform. Currently, users can create a money market for any asset with a Uniswap-based WETH token pair.  

To combat the risks inherent in allowing virtually any asset to be borrowed from its decentralized coffers, Euler has introduced a series of “risk-based” asset-tiers to protect both the protocol and its users. The first of these tiers is the so called “isolation tier” which includes assets with relatively low liquidity. As the name suggests, these tokens can only be borrowed in isolation and cannot be used as collateral to secure another loan.

Next are “cross-tier” assets which also lack the ability to be posted as collateral but can be borrowed alongside other tokens. Lastly, Euler’s “collateral tier” includes ERC-20 assets with relatively deep and liquid markets.

Unlike cross- and isolation-tier assets, these tokens can be used to collateralize loan balances and can be borrowed freely without restrictions.

In addition to asset tiers, Euler has also implemented risk-adjusted borrowing capacities to limit the risks inherent in lending less liquid, more volatile tokens. As opposed to other lending platforms which only consider the risk of the asset being pledged as collateral, Euler also accounts for the volatility inherent in the asset being borrowed. Within this framework, assets with higher risk profiles are assigned lower “borrow factors,” limiting the amount users can borrow with a given sum of collateral, the project’s whitepaper explained.   

All depositors are bestowed with interest bearing eTokens that can be redeemed for the underlying collateral at any time. Both the value of the user’s collateral as well as any outstanding debt are calculated using Uniswap’s decentralized time weighted average price (TWAP) oracles, Crypto Briefing explained.

Euler utilizes so-called “reactive interest rates,” or those which dynamically adapt to the underlying market conditions of each asset listed on the protocol, documentation said.

This process autonomously dictates borrowing costs across the platform resulting in a high degree of capital efficiency.

Euler’s Dutch-auction style liquidations help to limit the value that Ethereum validators can extract upon such liquidation events.

As of October 2022, Euler supports more than 75 individual assets and recognizes a total value locked (TVL) of roughly of $315 million, per DeFi Llama.   

When was EUL created and how much was it worth?

Euler was created by Dr. Michael Bentley, Doug Hoyte and Jack Prior. Their protocol’s mainnet officially launched in December of 2021.

That prior August of 2021, the project received roughly $8 million from Paradigm, a crypto VC.

Some ten months later, Euler got another $32 million in funding, this time from a series of backers including Uniswap and Coinbase Ventures, according to Crunchbase.

Euler’s native EUL was first released via public token sale in late November of 2021 but remained in a tight range. Data from CoinGecko shows EUL hitting an all-time high of $12.78 in early September of 2022.

How is the price of EUL determined?

EUL’s price is partially a factor of its deflationary nature. Only 27.18 million EUL tokens will ever exist, of which 11.8 million are currently in circulation. In terms of tokenomics, roughly 25% of EUL’s supply was reserved for public token distributions and another 25.8% allocated to various Euler Labs shareholders. Another 20.6% was dished to the project’s core developers and an additional 13.8% sent to Euler’s ecosystem treasury.  All remaining supply was distributed as such, EulerDAO partners (9.7%), retroactive token distribution (1.0%), and project incubators (4.0%).

Why does EUL have value?

Users can expect to find value in Euler’s permissionless approach to facilitating exposure to less liquid tokens, provided the crypto/DeFi market in general continues to expand.

Relative to established DeFi money markets like AAVE and Compound, Euler could be seen as having longer-term staying power as it is built to handle the risks associated with facilitating lending/borrowing services for assets out at the far end of the risk curve.

Is EUL secure?

A standard ERC-20 asset, EUL is supported by a range of Ethereum wallets and exchange-based storage solutions.

In terms of platform security, Euler is a non-custodial money market, meaning users always maintain ownership of their private keys. 

What are the main benefits of EUL?

Euler’s permissionless lending platform allows users to create a money market for virtually any digital asset, regardless of its underlying liquidity.

Euler leverages asset tiers and borrow/collateral factors to effectively manage risk on the platform.  

Like other decentralized lending platforms, Euler allows yield seekers to earn a reward on their tokenized deposits.

What do critics say about Euler?

That it’s facing competition from established players like AAVE and Compound who currently control close to 50% of the decentralized lending market, Crypto Briefing said.