Euler Returns with V2 Following 2023 Hack

DeFi lending market Euler has shipped V2 to mainnet in hopes of cornering onchain origination.

What’s the Scoop?

• Flash Back: On March 13, 2023, Euler V1 suffered a disastrous flash loan attack that resulted in the loss of $197M in user deposits, or 66% of its TVL. While subsequent recovery efforts returned nearly 90% of the stolen funds, the decision was made to wind up V1 operations and pivot development efforts towards V2 at this time.
• Modular Lending: Euler doubles down on its permissionless lending approach in V2 with the Euler Vault Kit, which enable users to deposit virtually crypto asset, from crypto tokens to transfer-restricted RWAs to non-fungible assets, into vaults that can opt-in to accepting deposits from other vaults as collateral.
• Safety First: To reassure those suspicious about depositing into V2 given its increased complexity and the prior hack, Euler has solicited 31 individual audits and is offering $4.75M in bug bounties to incentivize would-be hackers to report potential issues.
• Points Program: Vault creators and liquidity providers – and potentially borrowers/leverage traders – will earn XP as part of the 4-month “Euler Experience Points Initiative.” Although Euler states that XP has no inherent value and confers no rights to addresses that accrue it, recipients may be eligible for a future airdrop.

Bankless Take

Modular lending protocol Morpho enjoyed immense success throughout the first half of 2024, powered by an insatiable thirst for high-leverage, high-risk loans against Ethena synthetic dollars and liquid staking tokens (LRTs). The ability to intertwine vaults through Euler V2 reduces the inherent fragmentation of modular lending models while increasing the capital efficiency of a given vault, theoretically providing a more simplistic user experience, boosting depositor yields, reducing borrower costs, and making Euler a top money market destination.