Euler v2: The New, Modular, Age of DeFI

It’s official. Euler is relaunching! Today, we’re excited to unveil Euler v2— The Modular Lending Platform. Check out the Lite paper or read on below to find out more.


Euler v2 is a modular lending platform that will have two main components at launch: 1) the Euler Vault Kit (EVK), which empowers builders to deploy and chain together their own customised lending vaults in a permissionless manner; and 2) the Ethereum Vault Connector (EVC), a powerful, immutable, primitive which give vaults superpowers by allowing their use as collateral for other vaults. Together, the EVK and EVC provide the flexibility to build or recreate any type of pre-existing or future-state lending product inside the Euler ecosystem.

Euler v2 provides a best-in-class experience for lenders and traders alike, by providing unparalleled access to diverse risk/reward opportunities, new collateral options, lower net borrowing costs, advanced risk management tools such as sub-accounts and profit and loss simulators, custom-built limit order types (including stop-loss and take-profit), and greatly reduced liquidation costs.

Features will include:

  • Customizable Vaults: Euler v2 introduces the Euler Vault Kit (EVK), allowing developers to build ERC-4626 vaults with complete freedom. No constraints on governance, oracles, or upgradability.
  • Core Vault Class: Create governed lending products for risk-managed, capital-efficient lending experiences. Euler v2 enhances the user journey for borrowers and traders.
  • Edge Vault Class: Develop ungoverned, modular vaults for establishing permissionless lending markets. Euler Edge forms the base layer for a free-market approach to risk management.
  • Escrow Vault Class: Enable any ERC20 token as collateral without earning yield. Escrow vaults ensure collateral accessibility for liquidations and offer protection to borrowers.

New Features of EVK

  • Synthetic Assets: Euler v2 enables the creation of collateralized debt positions and synthetic assets. Explore new synthetic assets within Euler with a permissionless approach to product creation.
  • Nested Vaults: Tokenize vault shares and create nested vaults for innovative lending and borrowing opportunities. Opt-in to riskier collateral types without affecting other lenders.
  • Permissionless Rewards: Leverage RewardStreams, an open-source module, for seamless distribution of rewards without staking. Foster dynamic and efficient user engagement.

Ethereum Vault Connector (EVC)

  • Interoperability Layer: The Ethereum Vault Connector (EVC) serves as an open-source interoperability layer, allowing easy connection of vaults within the Euler ecosystem.
  • Advanced Trading and Risk Management: For developers, the EVC provides multicall batching, flash liquidity, gasless transactions, and an “operator concept” for advanced trading and risk management strategies.

FeeFlow: Empowering the Euler DAO

  • Fee Auction Mechanism: FeeFlow, an open-source module, introduces a reverse Dutch auction mechanism, empowering the Euler DAO to control fees on Euler markets and convert them into other types of assets.
  • Passive Income for Vault Creators: Vault creators can set fees, creating a passive income stream while contributing to the Euler DAO’s financial flexibility.

We’re Just Getting Started

Euler v2 addresses the limitations of monolithic and isolated lending protocols, aiming to become the primary liquidity layer for DeFi. The modular architecture resolves liquidity fragmentation, allowing permissionless creation of vaults that seamlessly connect across the ecosystem.

In the decentralised finance (DeFi) landscape, the foundational practice of lending and borrowing digital assets is crucial for the emergence of capital markets. Traditional monolithic lending protocols often impose restrictions on borrowing, limiting asset selections and enforcing conservative loan-to-value (LTV) requirements. Additionally, heavy fines for liquidation further hinder the trading experience for borrowers and traders. On the other hand, isolated lending markets offer greater flexibility, but come with the downside of fragmenting collateral and inhibiting rehypothecation, resulting in lower capital efficiency.

Euler v2 will be a first-of-its kind solution to these challenges, with the goal of becoming the primary liquidity layer for DeFi. Its modular architecture addresses the liquidity fragmentation problem by enabling the permissionless creation of Edge vaults, allowing seamless collateral usage across the broader ecosystem. This innovative approach connects different vaults from various product lines via the Ethereum Vault Connector (EVC), ensuring unparalleled flexibility for lenders, borrowers, builders, and traders without compromising on security or risk management.

But Euler’s vision extends beyond existing possibilities. We see a world that includes real-world assets, non-fungible tokens, IOUs for uncollateralized lending, peer-to-peer lending, and oracle-free lending. The modular design and forthcoming developments aim to establish Euler as a global liquidity layer and a comprehensive hub for lending, borrowing, and trading on EVM-based networks.

To join us on this journey, please see our lite paper here, and more technical white paper here. Happy building.

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