After the $197 million hack, Euler Finance expects a "revival" with DeFi v2 version.

The DeFi v2 protocol of Euler Finance has been launched, allowing developers to build customized borrowing and lending vaults.

After the $197 million hack, Euler Finance expects a “revival” with DeFi v2 version.

Euler Finance, the lending protocol that was a victim of the $197 million hack in March 2023, has recently introduced version 2 with several upgrades in DeFi features to limit the ‘repetition’ of the old security incident.

The return of Euler Finance comes after undergoing 31 audits from companies such as Certora, Omniscia, OtterSec, Open Zeppelin, and Trail Of Bits. Along with a series of high-value audit competitions including Cantina’s $1.25 million “Capture the Flag”, Hats Finance’s $3.5 million, and finally, a bug bounty program will be launched this week.

According to the announcement, Euler Finance v2, introduced by the development team, will be a “super credit lending protocol”, completely different from the v1 version, which is only for lending/borrowing like Compound or Aave, with improvements including:

• Allowing the deployment of ERC-4626 vaults without permission through the Euler Vault Kit, connecting to other vaults via the Ethereum Vault Connector

• Designed to allow developers to create highly customizable lending/borrowing vaults, opening up multiple use cases for on-chain credit, eliminating the fragmentation and inefficiency of capital that Euler v1 “hindered” isolated lending markets.

• The Euler user interface supports 4 types of vaults upon launch: Escrow collateral vault; Managed vault; Unmanaged vault; and Yield aggregator vault.

• These vaults can be designed to hold users’ deposits in traditional crypto tokens, real assets tokenized with restricted transfer rights, native minted synthetic assets, and NFTs.
• They can also be customized, allowing the creator of the vault to set risk/reward parameters and choose to maintain administrative control to actively manage risk or allow borrowers to manage their own risk.
• Each vault can recognize deposits in existing vaults as collateral assets.

• Euler v2 allows for “free market liquidation,” with advanced vault creators being able to customize their own liquidation. However, it still retains the original liquidation mechanism of Euler v1 as a standard, providing the lowest liquidation rewards in DeFi, helping to protect borrowers and maintain pool stability.

• EUL will still be the governance token for Euler v2.

Illustrations of how the new types of Vaults work in Euler Finance v2. Source: Euler Finance Blog

As Coin68 reported, the lending protocol Euler Finance has become a victim of a flash loan attack on March 13, 2023. The security incident resulted in a loss of $197 million in ETH, DAI, WBTC, and USDC, making it the most serious DeFi hack of 2023 to date.

To recover the stolen funds, Euler Finance offered a 10% reward, equivalent to $19.7 million, to the attacker, along with a $1 million bounty for anyone who provides information about the hacker if the funds are not returned.

Despite initially rejecting the request for payment, however, after the negotiation process, Euler and the attacker made significant progress. The hacker has returned 100% of the stolen money from the protocol and sent an apology to the affected victims.

After the attack, Euler’s EUL token has dropped nearly 70% in value to 2.07 USD. Currently, the token is trading at 5.07 USD.

The price chart of EUL token of DeFi protocol Euler Finance on CoinMarketCap was captured on the evening of 04/09/2024.

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