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Protocol introduction

Euler V2 is a modular lending protocol built around independent vaults. Suppliers can lend assets, borrowers can use accepted collateral to borrow, and curators can assemble markets for different assets and risk preferences. EulerEarn adds single-asset vaults that allocate deposits across configured strategies.

The protocol is permissionless: using the Euler Vault Kit (EVK), anyone can deploy a configurable lending vault for an ERC20 asset. A market is formed by connecting vaults and choosing which collateral relationships, price oracles, interest-rate models, caps, and risk parameters apply. This design supports anything from a single collateral-and-debt pair to a larger cluster of connected vaults without forcing every user into one shared pool.

What you can do

  • Supply: deposit an asset into an EVK lending vault or EulerEarn vault and receive ERC-4626 shares.
  • Borrow: provide collateral in a separate account and borrow from a vault that accepts it.
  • Multiply: use the app's prepared borrow-and-swap flow to build a leveraged position where a route is available.
  • Curate: deploy and configure vaults, connect collateral, and manage supported parameters.
  • Build: integrate with EVK vaults and coordinate multi-vault actions through the EVC.

Key concepts

  • Euler Vault Kit (EVK): The smart contract framework used to create and manage individual lending and borrowing vaults. Each EVK vault is an ERC-4626 vault with borrowing logic.
  • Vaults: Lending vaults for a specific underlying asset. Users deposit assets and receive shares. Deposits may serve as collateral where another vault accepts them. Some vaults are non-borrowable, meaning deposits can be used as collateral but cannot be borrowed from that vault.
  • Oracles: Price feed contracts used for collateral valuation, debt valuation, and liquidation checks. Euler V2 supports multiple oracle types, including Chainlink, Pyth, Redstone, and Chronicle, with custom configurations per vault or router.
  • Interest-rate models (IRMs): Configured models that provide a vault's borrow-rate input according to the model's logic. Supplier returns are derived from borrower interest, utilisation, fees, and vault accounting. Not every IRM is utilisation-based.
  • Hook Targets: Optional contracts that can check, restrict, or block selected vault operations before actions such as deposit, borrow, or liquidation. Hooks call designated Hook Target contracts, such as HookTargetAccessControl or HookTargetAccessControlKeyring, that implement the configured logic.
  • Ethereum Vault Connector (EVC): A core contract that acts as an alternate entry point for EVK vaults. The EVC coordinates cross-vault actions, batching, deferred checks, sub-accounts, operator permissions, and permit-based execution (EIP-712).
  • Controller (EVC Context): When a user borrows from a vault via the EVC, they designate that vault (or another contract) as a Controller for their EVC account. This grants the Controller authority over the user's enabled collateral set within the EVC, allowing it to enforce the borrowing vault's rules (e.g., prevent collateral withdrawal, seize collateral via controlCollateral during liquidation).
  • Risk Management: V2 uses isolated vaults and markets, vault-to-vault loan-to-value factors, caps, oracle configuration, and liquidation mechanisms. A vault's risk profile depends on its live configuration and market conditions.

Euler V2 vs v1

While sharing the goal of efficient lending and borrowing, Euler V2 differs significantly from earlier versions:

  • Architecture: Earlier versions had a single, monolithic pool for all assets with cross-collateralization. V2 uses isolated, permissionlessly deployable vaults via the EVK.
  • Risk: Earlier shared-pool exposure is replaced by vault-specific assets, collateral links, oracle routes, LTVs, caps, and governance settings. Risk follows those settings and any connected collateral relationships.
  • Asset Listing: Earlier versions combined permissionless listing with governance-managed risk tiers. V2 keeps listing permissionless through permissionless vault creation for any ERC20, with risk parameters set by the vault creator instead of governance.
  • Oracles: V2 introduces a configurable oracle framework supporting multiple providers and per-vault or per-router configurations.
  • Modularity: V2 lets IRMs, oracles, hook targets, and governance models be tailored per market.

Lending position mechanics

  1. A supplier deposits an underlying asset into an EVK vault and receives ERC-4626 shares. Withdrawals depend on the vault's available liquidity and contract limits.
  2. A borrower enables accepted collateral in an EVC account and designates a liability controller. The liability vault values collateral and debt through its configured oracle route and enforces borrow LTV, liquidation LTV, caps, and account checks.
  3. Borrower interest accrues to the liability vault according to its interest-rate model. Suppliers receive the corresponding vault accounting, after configured fees, while available liquidity changes as assets are borrowed or repaid.
  4. If the account no longer satisfies the liability vault's collateral requirements, it can become eligible for liquidation. See Liquidations for the mechanism and Portfolio and liquidation for monitoring guidance.

Continue

  • To supply or use Earn vaults: Use Euler.
  • To integrate contracts, data, or transactions: Build.
  • To configure vaults, collateral, or governance: Curate.
  • To review position failure modes and security controls: Liquidations and Security and risk.
  • To inspect scoped evidence for a particular contract version or commit: Audit reports.