What Is Euler Finance?
Euler Finance is a decentralized finance (DeFi) lending platform launched in December 2021. It operates on the Ethereum network, and its primary selling point is its permissionless listing of assets. This allows users to decide which tokens to list and create a lending market for, as long as the tokens have WETH trading pairs on Uniswap v3.
Background
Micheal Bentley, Doug Hoyte, and Jack Prior founded Euler Finance in 2021.
How It Works
In traditional crypto lending programs, assets must be approved by a vote of the governance framework before they can be listed and traded. Euler Finance changes this model by allowing users to list any token with a WETH trading pair on Uniswap v3.
One of the primary innovations of Euler Finance is the Asset Tiers Mechanism. This mechanism divides crypto assets into three tiers to manage risk: the Isolation-tier, the Cross-tier, and the Collateral-tier. The isolation tier, which includes permissionless listed assets, has the highest risk and, therefore, cannot be used as collateral for lending. The collateral tier, which provides for low-risk crypto assets like ETH, USDC, and most stablecoins, can be used as collateral.
However, this mechanism introduces a new problem. Once a user’s account has borrowed an asset in the isolation tier, the account is locked and cannot borrow additional assets. Euler Finance supports the concept of “sub-accounts” to solve this issue. Each Ethereum account can create up to 256 sub-accounts on the platform to manage multiple positions more quickly.
Key Takeaways
- Euler Finance is a decentralized finance lending platform that operates on the Ethereum network.
- It allows users to list any token with a WETH trading pair on Uniswap v3, changing the traditional model requiring assets to be approved by a governance framework.
- Euler Finance uses an Asset Tiers Mechanism to manage risk, dividing crypto assets into the Isolation-tier, Cross-tier, and Collateral-tier.
- The isolation tier, which includes permissionless listed assets, carries the highest risk and cannot be used as collateral for lending, while the collateral tier, which provides for low-risk assets like ETH, USDC, and most stablecoins, can be used as collateral.
- Euler Finance supports the concept of “sub-accounts,” allowing each Ethereum account to create up to 256 sub-accounts on the platform to manage multiple positions more quickly.
