Euler Finance is a decentralized lending protocol. Users deposit crypto to earn interest, or post collateral to borrow other assets. The current version, Euler v2, launched on September 4, 2024 8. Instead of one shared pool, it is built from many separate lending vaults that can accept each other as collateral 2. Anyone can create a vault. Many vaults are run by third-party "curators" who set the risk parameters. Euler Labs develops the code and the Euler DAO governs the protocol. Euler v1 lost $197 million in a March 2023 exploit, and most of those funds were later returned 1011.
Aave and Compound pool most assets in one market with one set of rules. Euler v2 splits lending into separate vaults, and each vault holds a single asset. Every vault is an ERC-4626 token vault built with the Euler Vault Kit (EVK) 2.
The Ethereum Vault Connector (EVC) links the vaults. Through it, a vault can accept deposits in other vaults as collateral. You can deposit wstETH in one vault and borrow USDC from another that accepts it. Each address gets 256 sub-accounts, so you can keep separate positions without new wallets. Each sub-account can carry only one debt at a time 2.
The lite paper describes four kinds of vault 2:
| Vault type | Can be borrowed from? | Who sets the rules |
|---|---|---|
| Escrowed collateral | No; collateral only, earns no interest | No governor |
| Governed | Yes | A governor (DAO, curator or individual) sets interest rates and LTVs |
| Ungoverned | Yes | Parameters fixed at creation |
| Yield aggregator (EulerEarn) | Allocates to other vaults | Allocator within approved strategies |
The table shows the main point for users: risk is set per vault. Before depositing, check who the governor or curator is, which collateral they accept, which oracles they use and whether a timelock delays parameter changes. The docs tell users to review these roles, including the guardian and fee-recipient addresses 4.
Each governed vault sets a loan-to-value limit for every collateral it accepts. Your position's health compares risk-adjusted collateral with debt. When health falls to 1 or below, liquidators can take over part of your debt and receive your collateral at a discount. The docs say a position can be liquidated more than once if it stays unhealthy 3. The discount uses a reverse Dutch auction: it starts small and grows until someone takes the trade. Under v1, liquidation bonuses on large loans were below 0.7% 2. That is a historical figure, not a current guarantee.
There is no single Euler fee. Lenders receive the borrow rate × utilization × (1 − the vault's interest fee) 3. Vault creators set that fee, and part of it goes to the Euler DAO 2. EulerEarn vaults can also charge a performance fee 3. Gas on the chain you use comes on top. The app shows the fee settings for each vault.
EulerEarn vaults pool deposits and spread them across a set of approved lending vaults. An allocator decides the split 6. You take on the allocator's choices plus the risks of every underlying vault.
EulerSwap is Euler's exchange, announced in May 2025. It is built on Uniswap v4 hooks and sends liquidity providers' deposits into Euler lending vaults. The same capital can then earn lending interest, serve as swap liquidity and back loans 12. The design adds lending and liquidation risk to the usual market-making risks. Euler reported five audits and a $500,000 capture-the-flag contest before launch 12.
Euler Labs builds the protocol, and Michael Bentley is its co-founder and CEO 8. The Euler DAO receives a share of vault fees 2 and governs through the EUL token. Most day-to-day risk decisions in v2 are made by vault governors and curators, not by the DAO. That is a deliberate change from v1. Bentley said v1's single governance model "didn't scale" 9. CoinPulse reviews curators separately in its Morpho and Euler curator ratings.
On March 13, 2023, an attacker used a flash loan to exploit Euler v1 and took about $197 million 10. The protocol was disabled the same day 11. Euler offered a $1 million bounty for information about the attacker 11. The attacker began returning funds on March 18 and sent the last $31 million on April 3. More than $177 million came back in total. Euler Labs said "all of the recoverable funds" had been returned 10. Redemptions opened on April 12, 2023. About 1,100 ETH that had gone through Tornado Cash could not be recovered. In markets where bad debt exceeded reserves, the remaining loss was split pro rata among depositors 11.
Hacks in DefiLlama’s public database are also scored as the security record on the Euler rating page.
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