Skip to main content

Vault Types

Introduction

In the dynamic world of Euler's lending ecosystem, vault types serve as trusted classifications that help users navigate the complex landscape of lending opportunities. These classifications aren't just labels - they're verified through a sophisticated system of smart contracts called 'perspectives' that act as on-chain validators. Think of perspectives as digital inspectors that verify whether a vault, and all the vaults it's connected to through its collaterals, meet specific safety and functionality criteria.

How Perspectives Work

Perspectives are smart contracts that act as on-chain validators, implementing a standardized interface to:

  • Verify vault configurations (perspectiveVerify)
  • Check if a vault has been verified (isVerified)
  • Keep track of all verified vaults (verifiedArray)

The beauty of this system is that once a vault is verified, this information is cached on-chain, making it gas-efficient to check a vault's status later.

Verified Vault Types

Governed Vaults​

Governed vaults are actively managed by verified risk managers or curators who have undergone a KYB (Know Your Business) process. These trusted entities are responsible for setting and adjusting risk parameters, managing collateral types and their risk levels, monitoring market conditions, and ensuring the safety and stability of their vaults. The initial verification of these vaults is a manual process, where the vault configuration is evaluated and sanity-checked. Once approved, these vaults are fully subject to the risk manager's governance decisions. This model has become the standard in the ecosystem because it combines the flexibility of active management with the accountability of verified entities. These vaults are ideal for passive lenders seeking additional yield while relying on the governor's risk management expertise.

Escrow Vaults​

Escrow vaults are like secure deposit boxes in the DeFi world. They're designed to hold deposits that can be used as collateral for loans from other vaults. Since they don't allow borrowing, they don't earn interest for depositors. Their parameters are fixed and unchangeable, making them predictable and stable. These vaults can be safely reused multiple times as collateral for different vaults.

Ungoverned Vaults - Edge​

Edge vaults are designed for active users who want full control over their risk exposure. With fixed parameters and no governor to make decisions, users must actively monitor and manage their positions themselves. Each vault may only accept collateral from other vaults in its market, creating a controlled risk environment that users must navigate independently.

Earn Vaults​

Earn vaults represent a specialized category of governed vaults designed to pool and manage passive lender assets. These vaults function as flexible investment vehicles, allowing the vault governor to allocate assets across various ERC4626 vaults, including both Euler-native vaults and external vaults such as sDAI. This structure enables dynamic portfolio management, where asset allocation can be adjusted in response to changing market conditions and opportunities.

Unverified Vaults​

Unverified vaults are the wild west of the Euler ecosystem. While they're deployed using the main EVK vault factory, they don't meet the criteria for any of the verified types. These vaults are for advanced users who are comfortable with minimal guarantees about functionality.

Understanding Vault Types

The classification of vaults into different types isn't just about putting labels on things - it's about creating a framework for understanding risk in a complex system. This is particularly important because:

  1. Vaults can be highly customized with many risk parameters
  2. Vaults can recognize deposits in other vaults as collateral
  3. Risk exposure can come from both direct interaction and indirect exposure through collateral vaults

Risk Management Considerations

When choosing between governed and ungoverned vaults, you're essentially choosing between two different approaches to risk management:

Governed Vaults: These are like having a professional risk manager on your side. You need to trust the vault governor to:

  • Adjust vault parameters appropriately as market conditions change
  • Limit the vault's exposure to other risky vaults
  • Make timely decisions in response to changing economic conditions

Ungoverned Vaults: These are like self-directed investing. You need to:

  • Proactively manage your own risks
  • Understand that vault parameters cannot change in response to market conditions
  • Be aware that you bear full responsibility for monitoring and managing your exposure

Customizing Vault Classifications

The beauty of Euler's system is its flexibility. If the default vault type classifications don't meet your needs, you have two options:

  1. Disable the default classifications in the user interface and manually add the addresses of vaults you want to use
  2. Create your own perspective smart contract to define custom vault classifications (see the EVK Periphery repository for examples)

Euler DAO Markets

In the vast landscape of Euler's lending ecosystem, the DAO-run markets stand as carefully curated financial hubs, each serving a unique purpose in the broader DeFi landscape. These markets are the result of a strategic partnership between Euler DAO and Gauntlet, bringing together community governance and professional risk management expertise.

Ethereum Network Markets​

  1. Euler Prime Think of Prime as the cornerstone of Euler's lending infrastructure. It's designed with a conservative approach, much like traditional financial institutions, but with the innovation of DeFi. Prime serves as a trusted foundation where users can access high-quality lending and borrowing services, with risk parameters carefully tuned to provide optimal risk-adjusted yields. Its role extends beyond just serving users - it acts as a trusted collateral hub that other vault creators can build upon, creating a ripple effect of trust throughout the ecosystem.

  2. Euler Yield While Prime focuses on traditional assets, Yield takes a different path, embracing the innovative world of yield-bearing strategies. It's like a specialized financial laboratory where users can leverage their yield-generating positions to access stable assets. Whether you're working with sUSDe, sdeUSD, or various Pendle PT tokens, Yield provides a dedicated space for these strategies to flourish, isolated from Prime's more conservative environment.

Other Network Markets​

  1. Euler Base As the Base network continues to grow, our Base market serves as a vital financial infrastructure, bringing Euler's lending capabilities to this vibrant ecosystem. It's designed to support the unique needs of Base's growing community while maintaining the high standards of risk management that Euler is known for.

  2. Euler Swell The Swell market represents our commitment to supporting emerging DeFi ecosystems. By providing robust lending and borrowing facilities, we're helping to build the financial infrastructure everybody needs to thrive in the Swell ecosystem.

  3. Euler Unichain Unichain's impressive growth in liquidity has created exciting opportunities for lending and borrowing. Our Unichain market is strategically positioned to support this growth, offering comprehensive support for key assets like USDC, WETH, and various staked ETH variants. It's designed to work harmoniously with Unichain's deep liquidity pools, creating a more efficient and accessible financial ecosystem.

What makes these DAO-run markets special is the combination of professional risk management and transparent governance. Gauntlet's expertise ensures that risk parameters are regularly reviewed and adjusted in response to market conditions, while the DAO structure provides a framework for community involvement. This approach creates a robust foundation for sustainable growth across multiple networks.