Euler Labs Prepares for Redemption : Set to Launch Euler v2 Following $200M Exploit

Decentralized-finance (DeFi) lending protocol Euler Finance is making a comeback after facing a staggering $200 million exploit last year. 

Learning from the challenges of the past, the team behind Euler Finance is set to unveil Euler v2, a reporetdly more flexible iteration of its cryptocurrency vault-enabled lending platform, accompanied by a comprehensive new whitepaper.

Euler v2, like its predecessor, operates on a non-custodial model, allowing users to deposit assets for lending and others to deposit collateral, take out loans, and pay interest to lenders. This revamped version introduces a more versatile system, embracing the Lego-like power principle of DeFi.

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Building Blocks of Euler v2

The new system integrates crucial building blocks, such as the Euler Vault Kit (EVK) and the Ethereum Vault Connector (EVC), to empower users in a permissionless manner. EVK acts as a toolkit, enabling builders to deploy and chain together customized lending vaults, fostering a decentralized and collaborative ecosystem.

EVC, on the other hand, facilitates the use of vaults as collateral for other vaults, introducing a new level of flexibility in the DeFi space. 

New Features of Euler v2

• Synthetic Assets: Euler v2 introduces collateralized debt positions and synthetic assets, providing users with a permissionless avenue for product creation within the Euler ecosystem.
• Nested Vaults: Users can tokenize vault shares and create nested vaults, unlocking innovative lending and borrowing opportunities. This feature allows participants to opt-in to riskier collateral types without impacting other lenders.
• Permissionless Rewards: Leveraging RewardStreams, an open-source module, Euler v2 enables seamless distribution of rewards without the need for staking. This promotes dynamic and efficient user engagement within the platform.

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Addressing the challenges of Euler Finance

The journey for Euler Finance has not been without its hurdles. Last year, the protocol fell victim to an exploit resulting in losses of nearly $200 million across dai (DAI), wrapped bitcoin (WBTC), staked ether (sETH), and USDC. 

The smart contract auditor BlockSec identified the attack, revealing that a flash loan was utilized by the attacker in four transactions.

However, in a surprising turn of events, the hacker responsible for the exploit has returned all "recoverable funds." Euler Finance announced that the decentralized lending platform received 10,580 ether (ETH), equivalent to approximately $19 million, from the exploiter's crypto address.