Euler’s Approach to Disrupting the Incumbents
Euler is the most innovative lending and borrowing protocol in the DeFi space when it comes to features, security, and scalability, and is now set to grow at a rapid pace.
The Euler protocol has been locked in development with numerous safe mode measures in place, but it is now ready to disrupt the industry by leaps and bounds. Euler protocol’s unique set of features present the ideal platform for native DeFi users and new users looking to engage with the future of finance.
As a custom-built system to support long-tail assets from the start, Euler protocol is able to manage the risks involved with opening up listings to the public. Decentralisation is full-heartedly supported by a platform that enables the market to decide which assets should be borrowed or lent. There are already 60 markets activated on Euler.
Lending and borrowing protocols need to manage the risks of volatile or illiquid assets, and therefore it is essential to adjust loan-to-value ratios so that overcollateralisation can prevent bad debts. Borrow factors can also be adjusted via governance to best reflect the asset’s underlying risk.
Decentralised Price Oracles
Members of the Euler community have put enormous efforts behind researching oracles and developing tools to illuminate risks. Research by Michael Bentley highlights the difficulty in carrying out attacks on decentralised oracles such as Uniswap v3’s Time Weighted Average Price (TWAP). The Oracle tool can also show the oracle risks involved with different Uniswap V3 pools.
Not only does Euler limit MEV, but large borrowers will find the liquidation process less taxing compared to other protocols. Expected borrowing costs are drastically lower as the protocol gives the market a voice in how much of a bonus that liquidators can receive. According to the Euler Dune dashboard from Shippooordao, the average liquidation bonus has been around 2.13%.
Users can batch build their transactions into a convenient list before a final submission. This reduces gas costs and helps to manage complex positions while previewing estimated costs and potential conflicts with the transactions.
Modular Smart Contract Design
Euler protocol’s smart contracts allow the community to upgrade oracles and other features without having to force users to migrate liquidity to a new protocol for each change. This design is much more optimal for decentralisation and DAOs. Scalability through redeployment is not scalability.
By protecting collateral from borrowers, users can prevent governance manipulation and short selling, and it is free from the risks of borrowers defaulting. This also helps reduce risks for DeFi native hedge funds and large borrowers.
Isolated and Cross Borrowing Modes
Euler protocol’s innovative approach helps to mitigate the systemic risks posed by long-tail assets while ensuring these riskier assets have a place in the lending and borrowing market. Isolated and cross tier assets can be borrowed and lent but not used as collateral. Cross tier assets can also be borrowed alongside other assets. This prevents bad debt situations from risky collateral assets.
Leverage can be built up quickly and extremely cheaply using the Mint and Burn functions. Users no longer need to develop complex recursive strategies or move to third-party solutions. Development in this area enables higher collateral ratios for highly correlated assets.
Euler’s sub-accounts makes trading even easier for users by eliminating the need to use multiple wallets to create multiple position. Users can manage positions and save on gas with minimal approvals in just one wallet.
Feeless and Generalised Flash Loans
Researchers and advanced users will find flash loans more economical as there is no interest or fees for this service. Use a liquidity deferral to flash loan multiple assets at once or perform complex position management.
Reactive Interest Rates
As an Euler innovation that maximises capital efficiency on the protocol, utilisation is balanced at 70% by automatically adjusting the interest rates without the need for governance.
Users can conveniently create leveraged positions using the mint and burn functions in combination with Euler’s 1inch and Uniswap integrations that allow users to take out gas-efficient long and short positions in a single click.
Liquidity mining on an asset could be automatically enabled by locking a certain amount of EUL tokens. The emission would increase by locking/voting for that asset. This feature can empower communities to vote for their preferred assets and gain more voting rights in the protocol.
Democratised Liquidity Mining
Native mining functionality enables EUL tokens to get mined by anyone at low costs. Any user can take part in the future of Euler governance due to the low learning curve and barrier to entry.
Estimated Time to Liquidation
This feature focuses on the estimated time in days until a liquidation will occur, assuming the asset prices and interest rates will not change. When crafting a position, users can understand the risk of liquidation due to the borrowing interest rate and better manage their leverage.
While these are just some of the many unique features, even more can be found in the white paper. Please check out the Discord community and governance forums for even more info on how Euler protocol is revolutionising lending and borrowing in DeFi.
Euler is a capital-efficient permissionless lending protocol that helps users to earn interest on their crypto assets or hedge against volatile markets without the need for a trusted third-party. Euler features a number of innovations not seen before in DeFi, including permissionless lending markets, reactive interest rates, protected collateral, MEV-resistant liquidations, multi-collateral stability pools, sub-accounts, risk-adjusted loans, and much more. For more information, visit euler.finance.
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