Decentralized finance (DeFi) lending platform Euler XYZ has raised $32 million in a funding round that was led by Haun Ventures, the new firm started by Andreessen Horowitz (a16z) alumna Katie Haun. The funding will go toward diversifying the treasury assets of the Euler DAO, which is expected to go live later this month.
Other backers in the round included Variant, FTX Ventures, Coinbase Ventures, Jump Crypto, Jane Street and Uniswap Labs Ventures.
“Euler takes a unique approach to addressing the risks associated with lending and borrowing crypto assets that stood out to us as exemplary in DeFi,” Haun said in a press release. “These kinds of innovative solutions are particularly important since lending and borrowing protocols serve as a key cornerstone of crypto markets.”
How it works
In traditional finance, third parties like banks facilitate borrowing by connecting those with excess money to those needing short-term access to money. In DeFi, the banks and other parties are replaced by blockchain-backed lending platforms.
Leading lending platforms like Aave and Compound let users borrow and lend from among a chosen group of liquid tokens, while Euler users can add any asset that has a wETH pair on decentralized exchange Uniswap to the Euler lending market.
“The primary purpose of Euler when we first started the project was to remove a lot of the barriers to entry that projects have in terms of getting listed under a DeFi protocol,” Euler XYZ CEO Michael Bentley told CoinDesk in an interview. “We wanted to create a permissionless protocol, kind of like the Uniswap of lending and borrowing, where users can activate their own lending markets as they see fit."
The permissionless setup means more tokens can be listed, but there is also a higher level of risk that one asset suddenly plunging in value could spill from one liquidity pool to another.
Euler XYZ offsets that risk by classifying assets into risk-based tiers. Euler generally allows users to borrow/lend in multiple assets at one time and to use multiple assets as collateral. The riskiest assets, however, are placed in isolation pools where users can borrow and lend but can’t use as collateral in transactions involving non-isolation assets.
“The key aspect here is risk isolation. How can you isolate risk for users in a way that doesn’t massively fragment capital?” Bentley explained.
Euler is managed by holders of the native governance token Euler Governance Token (EUL). The upcoming launch of the Euler DAO will give holders the chance to vote on development and operations and determine how the community treasury is put to use.
“The near term for Euler is really focused on decentralization. As part of that, there will be lots of integrations coming down the line,” Bentley said.. “We’ve been talking to developers across the DeFi ecosystem that have been interested in integrating Euler into their workflows.”
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