Euler Finance is a decentralized finance (DeFi) protocol designed to be modular and permissionless, enabling the creation of isolated lending markets on Ethereum. Initially launched in 2020 by Euler Labs, the protocol gained attention and controversy due to its approach to lending as well as facing one of DeFi's largest security breaches in 2023. Euler Finance aims to address issues in traditional and decentralized lending by allowing a wider variety of assets, including illiquid and volatile tokens, to be used as collateral, enhancing market flexibility and inclusion. ^{[1] [2]}​

History

Euler Finance was founded in 2020 by Michael Bentley, Doug Hoyte, and Jack Prior, with contributions from Anton Totomanov, Dariusz Glowinski, and Kasper Pawlowski. The founding team brought together expertise in blockchain development, software engineering, and financial technologies, positioning the project to address gaps in the DeFi lending landscape. ^[3]​

The project was thrust into the spotlight in March 2023 when it experienced a flash loan attack, resulting in a loss of approximately $197 million. This exploit was attributed to a vulnerability introduced by a code update intended to fix a smaller bug, known as the "first deposit bug." ^{[4] [5]} The protocol took measures to recover from the breach, successfully negotiating the return of the stolen funds by early April 2023. These efforts were complicated by links to known malicious groups such as the Lazarus Group and numerous false leads throughout the recovery process. ^{[1] [2] [5]}​

Co-Founder's Personal Token Loss

In January 2024, it was reported that Michael Bentley lost access to approximately 1.2 million EUL governance tokens (4.4% of total supply, valued at approximately $3.8 million at the time) due to a hardware wallet failure combined with an unrecoverable private key, occurring during the period he was also managing the exploit's aftermath. DL News later reported, in a January 30, 2024 update, that Bentley regained access to the tokens. ^[8]​

Technology & Architecture

Euler Finance operates using the Euler Vault Kit (EVK) and the Ethereum Vault Connector (EVC). These components enable users to create custom lending markets while allowing multiple assets to be used as collateral. This approach provides flexibility and cross-collateralization capabilities across various DeFi ecosystems. ^[6]​

The motivating technological approach behind Euler's design is to address the limitations faced by earlier DeFi protocols like Compound and Aave, which traditionally limited access to a few highly liquid assets. By facilitating the lending and borrowing of a broader range of tokens, Euler Finance allows users to manage their exposure to crypto asset volatility and to utilize their investments more dynamically. ^{[1] [6]}​

Products & Use Cases

Since its relaunch with Euler V2, the protocol has emphasized security, having undergone more than 50 audits, and it seeks to facilitate developments in DeFi. ^[7] Users can create borrowing vaults that support multiple collateral markets, allowing individualized parameters for each collateral relationship. This customization is available to both market creators and borrowers.

Euler's platform increased activity after relaunching, reaching over $4 billion in total deposits within a year, according to Bentley. This level of activity indicates the protocol's role in expanding the functionality and reach of DeFi lending. ^[7]​

Team & Governance

As of January 2026, Euler Finance underwent a leadership transition. Michael Bentley, the co-founder and CEO, stepped back from daily leadership to focus more on advisory roles and product development. Jonathan Han took over as CEO, bringing experience from crypto market intelligence firm The Tie. This leadership change coincides with a strategic pivot towards serving institutional, fintech, and retail-focused markets more directly, addressing the need for a stronger product market fit beyond its initial permissionless vision. ^[8]​

March 2023 Exploit

The flash loan attack on March 13, 2023, resulted from a vulnerability related to a single line of code added to fix the "first deposit bug." The exploiter used flash loans to drain approximately $197 million from Euler Finance in DAI, WBTC, stETH, and USDC. ^[5] Initial speculation about North Korean involvement emerged after some of the stolen funds were traced to an address linked to the Lazarus Group, known for its role in the Axie Infinity Ronin Bridge hack. ^[9]​

In an unusual turn, the attacker, who identified as "Jacob," returned the stolen funds by early April 2023. This resolution followed direct negotiations and involved multiple tracking efforts, showcasing the complexities of security and trust in the DeFi space. ^[4]​

Funding & Investors

In June 2022, Euler Finance raised $32 million in a funding round led by Haun Ventures. Total funding raised across three rounds is reported at $40 million. ^[6]​

Recovery and Strategic Growth

Following the 2023 breach, Euler relaunched with Euler V2 and underwent many audits. With Bentley's transition from CEO to an advisory and product-oriented role, the protocol seeks to cultivate bespoke credit markets catering to specific institutional and retail demands. ^{[7] [10]}​