Today we will look at a good project. Having seen too many garbage projects before, is there still a good project in the circle that is truly working? Today it has arrived; it is a lending platform called Euler. After observing it for a week, both the token price and on-chain data are explosive.
The project token price has already reached a new high, with a market cap of $200 million and an FDV of $290 million. As an old DeFi project from 2021, the current on-chain TVL data has reached $1.1 billion, and it can be said that there has been explosive growth after the V2 revision in 2025.
Introduction
Euler is a non-custodial, scalable, modular decentralized lending platform that primarily addresses issues in traditional lending protocols (like Aave, Compound):
- High asset listing threshold
- Parameters are inflexible
- Governance rights are overly centralized
- Liquidation penalties are too heavy
Euler is committed to building a more free, resilient, and highly customizable lending protocol, allowing users to customize risk parameters, interest rate models, liquidation logic based on asset attributes, and deploy personalized markets.
Core Functions and Technical Design
1. Modular lending architecture (Vault)
Euler V2 is built on the ERC-4626 standard, with each asset deployed in an independent Vault. Each Vault:
- It is a completely independent lending market.
- Has independent parameters (collateral ratio, interest rate model, oracle, etc.)
- Can freely combine to form customized lending combinations
2. Open asset listing mechanism
Unlike Aave, which requires community review to list assets, Euler allows any user to permissionlessly list a new asset as long as there is a Uniswap V3 trading pair with WETH.
3. Customizable interest rate models
Supports multiple interest rate models, including:
- Kink linear interest rate model (similar to Aave)
- Dynamically adjusting interest rate model (control theory model that adjusts automatically based on the market)
- Custom models (users can upload contracts)
4. Innovative liquidation mechanism
Euler adopts a 'soft liquidation' mechanism:
- Not a traditional immediate auction of assets + high penalties
- Instead, it uses a model with adjustable liquidation discounts for auctions.
- Liquidators gradually take over based on risk levels, without needing to force liquidate all at once.
Euler adopts a market-based auction liquidation with no fixed liquidation rewards. When a borrower's account health falls below a threshold, liquidation bots acquire collateral through reverse Dutch auctions at a discount. As the health factor deteriorates, the liquidation discount increases linearly (up to 20%), avoiding heavy penalties for minor defaults. This 'soft liquidation' approach makes liquidation decisions more economically friendly and reduces the impact on borrowers. Additionally, the liquidation rules for each Vault are completely isolated, affecting only that market and not spreading to others.
Aave/Compound adopts a fixed liquidation reward (generally 4%-10% for Aave) and a traditional mechanism with a maximum of 50% debt settlement.
5. Asset Layered Management (Tier System)
Euler classifies assets into three categories:
Collateral Tier: Usable for lending + collateral (like ETH, DAI, WBTC)
Cross Tier: Available for borrowing but not for collateral
Isolation Tier: Isolated assets that can only be used individually and cannot be combined with other assets
6. Oracle System
Relies on Uniswap V3 TWAP oracle, building price oracles through Uniswap LP pools to further enhance decentralization.
Comparison with AAVE
Team Introduction
The team members are shown in the image below; it is a UK team with real names and photos. Michael Bentley is the founder and CEO of Euler XYZ. Previously, he obtained a PhD in Mathematical Biology from the University of Oxford and worked as a postdoctoral research assistant at UCL. Although not a computer science or finance major, being a PhD from Oxford definitely makes him a top talent!
On-chain Data Analysis
Currently, the on-chain TVL is $1.1 billion, and it is expected to experience explosive growth in the next 2-5 years. Compared to AAVE's TVL of $24 billion and AAVE's FDV of $4.1 billion, a reasonable FDV for EUL should be $190 million. Currently, EUL's FDV is $290 million, which is slightly high, but EUL is still increasing, so the market may have given a slightly higher valuation.
Looking at the specific lending data, the total supply is $2.3 billion, with $1.2 billion borrowed. Its USDT, USDC, and ETH deposit rates are at 6%-7%, which is 2-3 percentage points higher than AAVE, hence the rapid increase in its TVL recently.
Its borrowing rates are lower, only around 3%, below its deposit rates, which is much lower than AAVE. So currently, it is subsidizing the market, which has a bit of that internet strategy flavor, using subsidies to capture users, and the effect is very obvious!
Token Economics
The total supply of tokens is 27 million, with 18 million currently in circulation, unlocking 66%. The current token price is $10.7, with a 24-month low of $2.4, meaning it has already increased fivefold. The token distribution is shown in the image below, and only the portion for employees and advisors is still unlocking, along with the protocol incentives.
Because it is DAO governed, the functions and uses of ttoken are as follows:
- Governance voting rights: Decide on asset listings, adjust risk parameters, etc.
- Incentive mechanism: Early user and lending market behavior incentives
- Liquidity distribution rights: Usable for Gauge voting to guide rewards distribution
In conclusion, the current product innovations can only be considered minor innovations. The so-called permissionless for all users means that assets not recognized by the mainstream will not be borrowed. The soft liquidation, if not implemented early in extreme market conditions, may lead to greater losses. The handling proposed by EUL is to let everyone share the burden, which is somewhat inappropriate.
The current rapid increase in TVL is still using a subsidy approach to capture the market, after all, there are higher deposit rates and lower borrowing rates. This method is also good because a large number of users are entering, data improves, token prices rise, and selling tokens to subsidize is also a good approach. I think this is much better than many projects that simply do nothing or just list tokens and lay flat.
Currently, with this momentum, there may continue to be growth. After all, the speed of TVL growth is rapid, and the lending market is a large market. Currently, $1 billion is not much, while AAVE still has over $20 billion, so getting to $5 billion-$10 billion is not unreasonable.