Euler Finance Research: $24M Market Cap × $522M TVL × P/E 16x

In the DeFi lending track, there is a protocol $EUL → stolen by hackers for $197 million—then fully recovered, and even with an extra $43 million → caused $137 million in bad debt due to a third-party rug pull—smart contracts with zero vulnerabilities → the founder/CEO resigned—new CEO is shifting toward the institutional market → monthly revenue plunged 91% from $11.61 million to $1.04 million → the token price fell from ~ $12 to $1

Then you look at its valuation:

MC/TVL = 0.046 (the lowest in the DeFi lending track) P/S (total fees) = 0.77x (half of Aave’s) P/E = 16x (a reasonable level in traditional finance) 88.7% of tokens are already circulating (nearly zero dilution risk) 2025 token buybacks of $2.78 million (11.5% of market cap)

The market is pricing this protocol at a "failure" valuation—one that has risen from ashes twice.

The question is: is this crisis value, or a value trap?

1. What is Euler? Why is architecture so important?

In one sentence: the DeFi world’s "meta-lending platform"—other lending protocols can be built on Euler, but not the other way around.

Founder Michael Bentley is a PhD in mathematical biology from Oxford; raised $40.8 million; investors include Paradigm, Haun Ventures, Coinbase Ventures, Jane Street, and Jump Crypto.

Euler v2 (launched in September 2024) was rebuilt around two core components:

EVK (Euler Vault Kit)—anyone can deploy customized lending vaults: custom oracles, interest rate models, liquidation mechanisms, and governance structures.

EVC (Ethereum Vault Connector)—an immutable cross-vault connection layer: deposits in one vault can be used as collateral in another vault. This solves the liquidity fragmentation problem of isolated lending designs—Morpho can’t do it.

This architecture is deliberately positioned between Aave’s single-pool model and Morpho Blue’s extremely minimal isolated vaults. Bentley’s positioning: "You can use Euler to build other lending protocols, but you can’t do it the other way around."

Deployment spans 16+ chains. EulerSwap (based on Uniswap v4) fuses a DEX with lending yields, with $1.8 billion in trading volume in its first month.

Curator model: professional risk-management institutions (including Gauntlet, MEV Capital, Steakhouse Financial, etc.) create and manage lending strategies, earning profit shares of up to 50%.

2. The $197 million hack event— the greatest revival in DeFi history

On March 13, 2023, a flash-loan attack drained $197 million from Euler v1 within 18 minutes.

Ironically, the vulnerability came from a function (donateToReserves) used to fix a small bug, but it lacked health checks. The attacker used it to donate collateral while retaining the debt, then self-liquidated at a 20% discount.

TVL collapsed from $311 million to $10 million. EUL plunged 45-70%. 11 related protocols were affected.

The attacker was later identified as Federico Jaime—a 19-year-old self-taught hacker from Argentina—who discovered the vulnerability during an insomnia night in Rome.

Recovery took 23 days: → on-chain summons → 10% bounty → $1 million public bounty → 100 ETH transferred to an address linked to North Korea’s Lazarus Group (later proved to be deliberate misdirection) → began repayment on March 18 (3,000 ETH) → accelerated on March 25 (51,000 ETH) → fully repaid by April 4

Because the hacker converted stablecoins into ETH—and ETH appreciated—Euler actually recovered $240 million, which is more than the stolen amount.

This revival story matters because it kick-started the most expensive security rebuild in DeFi history:

V2 security spend exceeded $4 million, with 40+ audit reports, from 13 audit firms (Spearbit, Certora, Trail of Bits, OpenZeppelin, Zellic). Certora’s formal verification achieved the "Holy Grail" property—proving accounts will never become unhealthy under any conditions. The $1.25 million Cantina competition (600+ participants) found no medium-/high-severity vulnerabilities. A $3.5 million mainnet practical CTF via Hats Finance also went undefeated—no one broke it. Current bug bounty: $7.5 million.

3. The Stream Finance incident— Achilles’ heel of the curator model

In November 2025, the third-party yield protocol Stream Finance collapsed. Operators entrusted $93 million to an individual for off-chain management, whose position was liquidated during market volatility in October.

xUSD fell from $1 to $0.24 (-77%).

Third-party curators (Re7 Labs ~ $14.65 million, MEV Capital ~ $25.4 million, TelosC ~ $123.6 million) accepted xUSD as collateral in Euler’s permissionless vaults. Total estimated bad debt on Euler was $137 million. TVL fell from about $2 billion to ~ $1 billion.

Key point: this is not an Euler smart contract vulnerability. The official vaults managed by the DAO had zero exposure and were operating normally. Losses were limited to specific third-party vaults.

But reputational damage is real—users see "Euler lost $137 million," not "Re7 Labs’ vault accepted fraudulent collateral on Euler."

This exposes the core contradiction of the curator model: permissionless creation means the protocol’s branding absorbs third-party failures.

4. Revenue plunges 91%—why, and can it be reversed?

Month Revenue

2025.10 $11.61 million

2025.11 $8.54 million

2025.12 $4.98 million

2026.1 $3.92 million

2026.2 $2.81 million

2026.3 $2.67 million

2026.4 $1.04 million (partial)

Driven by three factors: ① Stream Finance contagion directly removed $0.5-1.0 billion in TVL; ② the overall DeFi deleveraging cycle; ③ CEO Michael Bentley resigned on January 12, 2026, admitting that the "fully permissionless vision" failed to find "strong product-market fit."

But full-year 2025 data proves the revenue engine is effective: $66.52 million in fees, $3.66 million in gross profit. When TVL and borrowing conditions are healthy, Euler is a money-making machine.

5. Tokenomics— the cleanest among DeFi small-cap stocks

Total supply is fixed at 27,182,818 tokens (a tribute to Euler’s constant e). 88.7% are already circulating. All strategic investor tokens are fully unlocked. The remaining ~ 3.06 million mainly sit in the DAO treasury, foundation, and LP positions. The optional 2.718% annual inflation mechanism has not been activated.

Fee Flow buyback mechanism: protocol fees are converted into EUL via a Dutch auction for buybacks. → 2025 buybacks of $2.78 million (11.5% of $24M market cap) → 2026 YTD $0.379 million → the bought-back EUL flows into the DAO treasury (not burned)

rEUL incentives fell from the peak of $3.12 million per quarter to $271,000 per quarter—showing financial discipline.

Compared with the three assets analyzed today: → Babylon: $0 holder income, $0 buybacks → Ondo: $0 holder income, $0 buybacks → Euler: $1.28 million holder income, $2.78 million buybacks

Euler is the only protocol with an active token value-capture mechanism at work.

6. Valuation: a surviving protocol priced at a failure price

Metric Euler Aave Morpho Compound

TVL $522 million ~$25 billion ~$7.2 billion ~$1.3 billion

Market Cap $24 million ~$1.4 billion ~$575 million ~$400 million

MC/TVL 0.046 0.06 0.08 0.25-0.35

P/S ( fees) 0.77x ~1.3x N/A ~5-8x

P/E 16x — N/A —

Re-estimated based on Aave’s MC/TVL: $31M ($1.30/EUL, +30%) Re-estimated based on Morpho’s MC/TVL: $42M ($1.74/EUL, +74%) Re-estimated based on Compound’s MC/TVL: $130-183M ($5.4-7.6/EUL, +440-660%)

If TVL recovers to $1 billion and reaches Morpho’s multiple: ~$80M (~$3.3/EUL, +230%)

But—DEX liquidity is only $209,000. A $100,000 market order could consume nearly half of the liquidity, causing 20-50%+ slippage. EUL is effectively not investable for institutional capital. This explains most of the valuation discount.

7. Risk scoring

Risk Score

Liquidity 9/10 (extremely high)

Curator model 8/10 (high)

Smart contracts 7/10

CEO change 7/10

Revenue decline 7/10

Competition 7/10

Market / macro 6/10

Regulation 4/10

Token dilution 2/10 (very low)

8. Final judgment

EUL is priced at a failure outcome with a $24M market cap—P/S 0.77x and MC/TVL 0.046x. If the protocol were healthy, it would be extraordinary value.

It is indeed not healthy: revenue dropped 91% over 6 months, TVL has been cut from its peak roughly in half, the founder left, and there was the $137 million bad-debt incident.

But it’s also not dead: → generated $66.52 million in fees during 2025 → token buyback mechanism continues running ($2.78M per year) → 88.7% of supply is circulating (nearly zero dilution) → $7 million+ in treasury provides a 4+ year runway → $4 million+ in security investment makes it the most thoroughly audited DeFi protocol → v2 smart contracts ran perfectly during the Stream incident

The asymmetry is real: → if TVL stabilizes at $500 million+ and moderately recovers: $2-3/EUL (+100-200%) → if the institutional transition succeeds and TVL returns to $1 billion+: $4-8/EUL (+300-700%) → if another major security incident occurs again: it may go to zero

Suggested position size: 1-3% of a risk-tolerant portfolio. Must accept the possibility of a complete loss.

Core monitoring: ① whether TVL stays above $500 million; ② whether monthly revenue rebounds to $3M+; ③ progress on the new CEO’s institutional partnership efforts; ④ whether another curator failure occurs.

The crisis is real. But value may also be real—and at $1/EUL, the market is giving you an opportunity to buy a protocol that reborn from ashes at a failure price.

⚠: This article does not constitute investment advice. Investing in cryptocurrency is extremely risky; please do your own independent research.#危机投资模型

— David's Crisis Investment Community 2026.04.12