Unit of account
Introduction
Euler enables borrowing and lending of any ERC-20 token, which requires a standardised way to express asset values relative to one another. A unit of account (UoA) serves as a common reference currency, allowing the Euler protocol to standardise price comparisons, calculate collateral values, and determine borrowing and lending ratios across different credit vaults.
Collateral and loan valuation
When a user deposits collateral and borrows another asset, the protocol must assess whether the collateral is sufficient. Without a common unit of account, comparing different assets like ETH, DAI, and WBTC would be challenging. The UoA provides a standard measure of value, ensuring accurate comparisons and helping determine when a borrower’s position becomes undercollateralised and eligible for liquidation.