What it is
Euler V2 is a modular lending protocol originally launched in 2021 and reintroduced as V2 in 2024 following a full recovery from a 2023 exploit. It operates as a permissionless lending platform where users can supply and borrow assets across isolated vaults. The protocol is governed by the Euler DAO with the EUL token. Euler V2's key innovation is the Euler Vault Kit (EVK), which enables anyone to deploy customized lending vaults composable through its EVC connector system, distinguishing it from monolithic money markets.
How it works
Euler V2 uses a vault-based architecture. The Euler Vault Kit (EVK) allows developers and DAOs to deploy isolated lending vaults with custom parameters, including collateral types, interest rate models, and oracles. These vaults are connected via the External Vault Connector (EVC), enabling composability where one vault can call another, allowing complex lending strategies without shared risk pools. Users can supply assets to earn interest or borrow by depositing collateral into a vault. The system avoids the cross-collateralization risk seen in pooled protocols; each vault is self-contained. Governance is handled by the Euler DAO through the EUL token, which votes on protocol upgrades and risk parameters.
Key numbers
- TVL: ~$0.3 billion (DeFiLlama, as of 2026-07-15)
- Chains deployed: Ethereum (primary), Base, Swell, BOB, Sonic, Berachain (6 chains)
- Audits: Spearbit, Certora, ChainSecurity
- Initial launch: 2021; V2 relaunch: 2024
Security and audits
Euler V2 has undergone audits from Spearbit, Certora, and ChainSecurity. No incidents have been reported since the V2 relaunch. The protocol's most notable event was a $197M exploit in March 2023 that targeted the original Euler v1 deployment. The Euler team fully recovered funds and relaunched as V2 with a redesigned architecture. The current smart contracts are upgradable through DAO governance, requiring multisig approval. While the DAO multisig introduces some centralization, it enables swift risk management. To date, no post-relaunch vulnerabilities have been identified.
Strengths
- Modular vault architecture: EVK enables permissionless deployment of custom lending markets, reducing systemic contagion risk. This design attracted ~$0.3B in TVL despite the protocol's history.
- Post-exploit resilience: Full recovery of user funds and transparent relaunch rebuilt trust; the protocol operates with multiple tier-1 audits and no subsequent incidents.
- Niche chain coverage: With deployments on Ethereum and emerging L2s like Base, Swell, BOB, Sonic, and Berachain, Euler V2 taps into new liquidity streams not dominated by larger peers.
Weaknesses and risks
- Smaller TVL: At ~$0.3B, Euler V2 lacks the depth of Aave Aave (~$14B, 9+ chains) or Morpho Blue Morpho Blue (~$7B), which can impact liquidity and borrowing costs for large positions.
- Historical exploit stigma: The 2023 incident, though resolved, may deter risk-averse institutional capital. User confidence must be continually earned.
- Governance centralization: Core development and key parameter changes are controlled by a DAO multisig, presenting a central point of failure, albeit improving reaction times.
How it compares
Among lending protocols, Euler V2 positions itself between permissionless infrastructure and curated markets. Compared to Aave Aave, the bluechip with ~$14B TVL across 9+ chains and established trust, Euler offers greater flexibility but far less liquidity. Morpho Blue Morpho Blue also provides permissionless isolated markets but with deeper integration across Ethereum and Base, holding ~$7B TVL. Compound Compound (~$1.3B) and Spark Spark Protocol (~$4.5B) are more traditional pooling models. Radiant Radiant Capital, which wound down operations in June 2026 after failing to recover from its 2024 exploit, demonstrates the risk of cross-chain deployments post-exploit. Euler V2's vault kit is unique in its composability via EVC, allowing vaults to interact, whereas Morpho's markets are strictly isolated. This makes Euler attractive for tailored lending strategies but limits network effects from shared liquidity.
Verdict
Euler V2 demonstrates strong technical recovery with a modular approach that fills a niche between monolithic money markets and fully isolated per-market primitives. Its ~$0.3B TVL and modest chain footprint keep it in the mid-tier for now, but the permissionless vault framework positions it for expansion. The lingering memory of the 2023 exploit demands ongoing vigilance. Rating: 7.5/10.
Reviewed 2026-05-27 by DeFi Intel Research Desk. DeFi Intel publishes editorial research, not financial advice. Do your own research and consult a licensed advisor for your situation.