Michael Bentley (Euler) on Modular Lending (EP.552)

Bullish

• $EULER— Explaining the history of Euler, advancements made after a v1 exploit, and the market potential of Euler v2.

  • “I think Euler v2, especially, even way more so than Euler v1, allows you to do things in the market that you just simply can't do on any of the protocol today. Or not very easily.”

    Michael·0:00Hear it

  • “Euler v2 is gonna bring... I think we'll be competing strongly with some of the bigger players in DeFi and traditional DeFi like Aave and up and coming players like Morpho. But there's a whole new world out there as well to explore, as I've said, with some of these big traditional finance players coming online. And I think Euler has an awful lot to offer when it comes to enabling new markets, tokenized real world assets that could help really explore new ground and work with institutions, enable 24-7 markets and trading of more traditional assets on top of the ones that people are used to trading in DeFi.”

    Michael·0:00Hear it

  • “What made Euler better and what made it attractive?... We had a lot of extra features and cool things that you could do on order in a really efficient and professional manner that are just clunky on other protocols. So you could batch transactions together, for instance, on our UI, which allowed to put on trades natively in the UI. And people were doing this on other calls, but they were typically left to visit somebody else's UI and pay extra fee. Or they would do it on Compound UI, but they do it manually through so called looping where they deposit and borrow and then swap something. So there's lots of funky things happening there, and we made the user experience a lot nicer by taking advantage of this batching functionality that we've built into the protocol. On the UI itself, we just tried to look after people, make sure that they're aware of risks... Then there was additional markets and all of that couldn't be accessed to the protocols. So that's always something that's a good way to take over a market or get a foothold in the market is to provide something that you can't get elsewhere. And Euler v1 was really successful with these liquid staking tokens, staked ETH and cbETH for all these things. People were doing trades at the time, looping staked ETH against ETH. So deposit staked ETH, earning a high interest rate, borrow ETH to pay a lower interest rate, swap it back. And then they build a leverage trade, or a leverage staking position and then a high rate of interest by doing that.”

    Michael·0:00Hear it

  • “So what Euler v2 really does is it allows people to create their own lending and borrowing markets for everything in the middle, essentially... It's this flexible and modular kit. You can build something like Aave if you want, or you can build isolated pairs, but you can also build smaller clusters of 3 or 4 different vaults, essentially, that connect different assets to one another. And with those, you can service whole swathes of the market that aren't currently serviced. Even if you're just focusing on the same assets that we have in DeFi today, you can have riskier or less risky pools of assets than you can find on something like today. And I think that's incredibly valuable, and it's definitely a path to a go to market strategy.”

    Michael·0:00Hear it

  • “Euler v2... we've had I'm not quite sure how many audits. It might be, like, 11 different audits now that the total of audits is approaching 30 when you consider all the different contracts.”

    Michael·0:00Hear it

  • “For anyone that wants to read the full thing, I wrote this blog post called War and Peace that details what happened. But in short, Euler v1 was a really, really heavily audited protocol. Everyone knew that as a team, we took security incredibly seriously. And as part of that process, it had this unified bug bounty. I think it was the largest bug bounty of any lending protocol out there of its time. And one day, the bug report came in saying that there was this issue. So we looked at the issue and it wasn't massive, but it was one of those. In a very rare circumstance, someone might be able to lose some money. So it's considered a bug that's something that should be fixed. So we developed a fix and took it to the auditors, how they audited and patched the bug. And over a year later, it turned out that that small bug fix had introduced a much larger bug. So in the end, what happened with Euler was around $200M worth of assets were stolen.”

    Michael·0:00Hear it

  • “It took around 6 weeks. But as a team, we worked extraordinarily hard together to track down the perpetrator to essentially compel them to return the funds that they'd taken... We all stood together and showed a huge amount of resilience... so Euler v2 was born out of that, the morale and everything that was shown during that period.”

    Michael·0:00Hear it
• $UNI— Noting the upcoming release and potential of Uniswap v4 with its modular approach.

  • “Uniswap v4 is coming out later this year, perhaps sooner than we think. And that's super interesting.”

    Michael·0:00Hear it

  • “I think the principle behind Uniswap v4 is quite similar to the principles behind Euler v2, really. They've taken this more modular approach, let people deploy their own markets, and let people customize them. And I think with that flexibility, we're gonna see a lot of innovation around DEX markets again, which could be fun. Some of that will probably be institutional as well.”

    Michael·0:00Hear it
• $RWA— Expressing excitement for the potential of tokenizing real world assets as a tailwind for Euler.

  • “There's a lot to be excited about with real world assets and tokenizing assets and bringing them on-chain.”

    Michael·0:00Hear it

  • “The move from BlackRock and some of these other projects that bring real world assets online has really been exciting.”

    Michael·0:00Hear it
• $INSTDEFI— Discussing the emergence and potential of institutional DeFi and its professionalization.

  • “I think the next wave will be institutional, and it will emerge over the next few years.”

    Michael·0:00Hear it

  • “I think institutions are already here. We can clearly see that with BlackRock tokenizing its first fund and so on.”

    Michael·0:00Hear it

  • “I went earlier, was it earlier this year or late last year to the same conference? It was absolutely buzzing with people, mostly institutions...”

    Michael·0:00Hear it

  • “I think the whole sector is professionalizing quite a lot.”

    Michael·0:00Hear it

  • “I do see massive changes in the user base and types of people that are interested.”

    Michael·0:00Hear it

Not investment advice.