Euler Finance has made a significant comeback following a devastating flash loan attack that occurred 18 months ago, introducing a groundbreaking modular credit layer known as Euler v2. This newly launched development kit is designed specifically for deploying ERC-4626 vaults, offering a highly customizable approach to managing lending risks.
This update allows users to select between various lending configurations, such as risk-isolated pairs or cross-collateralized vault clusters, as well as options for passive lending or fixed-parameter vaults. Michael Bentley, CEO of Euler Labs, emphasized the versatility of Euler v2, stating that its modular architecture enables the creation of markets with diverse risk parameters and collateral types, including those that are more resilient to fluctuating market dynamics. He stressed, “Euler v2 is built to be as adaptable as possible.”
One of the standout features of Euler v2 is its governance-agnostic design, allowing it to effectively manage risk and asset pricing while accommodating a diverse range of assets, including non-fungible tokens (NFTs), tokenized real-world assets (RWAs), and natively minted synthetic assets.
The protocol assures users of its rigorous security measures, attesting that Euler v2 has undergone thorough audits by 12 different cybersecurity firms which resulted in 31 comprehensive audit reports. In addition, the platform hosted a public post-audit bug bounty offering $1.25 million, without uncovering any medium or high-severity vulnerabilities. Collectively, Euler has invested $4 million in enhancing its security protocols in preparation for this relaunch.
Bentley pointed out a crucial caution for users: “Every market carries its own risks, and it’s imperative for users to do their research before interacting with any vault and to verify the parameters of each market. If you’re utilizing an ungoverned vault, you need to manage your own risk attentively.”
Euler v1, the precursor to this new version, was subjected to a hack that siphoned off $195 million in March 2023, although all stolen funds were eventually returned by the perpetrator. This type of attack typically involves leveraging uncollateralized flash loans to manipulate asset prices in a single transaction, which can yield profits for the attacker due to temporary price fluctuations.
In the specific incident with Euler, the attacker orchestrated the operation through two distinct accounts. The first borrowed from the protocol while using a “donate” function to artificially reduce collateral value, triggering a default. This allowed the second account to liquidate the first account, capitalizing on Euler v1’s liquidation discounts to acquire more assets than were lost.
Bentley reflected on the aftermath of the security breach, stating, “Euler v1 was extensively audited, and the risks of DeFi are extensive. We emerged from last year’s exploit stronger and more focused. We managed to recover all user assets and returned them to those who were affected, which was an impressive achievement.”
Recent statistics from DefiLlama indicate that Euler currently boasts a total value locked at $3.5 million, with approximately $343,000 in borrowed assets. Over the years, the protocol has successfully secured more than $40 million in funding from a diverse group of investors.
The launch of Euler v2 not only represents a technological advance in decentralized finance but also signals a renewed commitment to user security and flexible lending solutions. As the DeFi landscape continues to evolve, Euler Finance is poised to be a leading player, offering innovative tools in a space that demands both agility and resilience.