Euler.finance connects lending vaults with configurable borrowing markets

Asset compatibility and the choice between supplying and borrowing

A lending vault accepts a particular underlying token, so the selected network, token contract, and vault address must match the intended deposit. Borrowing introduces another compatibility requirement: the lending vault must accept the proposed collateral vault. Holding an asset in a wallet does not establish that relationship.

The Euler Vault Kit, or EVK, supplies the contracts for configurable lending vaults. The Ethereum Vault Connector, or EVC, coordinates accounts and operations across them. A market consists of the collateral relationships between vaults. Its design can connect an isolated pair or several vaults with shared collateral dependencies.

Curators can create and configure markets; integrators can build applications around those contracts. Permissionless vault creation does not mean every deployed vault accepts every account or asset.

Direct deposits and allocation through EulerEarn

Supplying creates a claim on a vault’s assets through shares. Direct lending concentrates that claim in the selected lending vault; EulerEarn introduces allocation across configured strategies.

Exposure to a selected lending vault

EVK lending vaults issue ERC-4626 shares to represent deposits. ERC-4626 is a standard for tokenized vaults. Borrower interest contributes to vault accounting, while fees, losses, and other configured mechanics affect the value represented by each share. A growing share value is therefore possible, but principal protection is not part of the deposit mechanism.

Allocation within an Earn vault

EulerEarn accepts one underlying asset and allocates it among enabled strategies. These can include lending vaults and compatible external strategies where configured. Curators and allocators manage the strategy set and allocations within their permissions. That arrangement reduces manual allocation work while adding exposure to strategy selection, role permissions, and withdrawal queues. The accounting value of an Earn position can exceed the amount immediately available to withdraw.

What limits the amount you can borrow?

Borrowing capacity depends on accepted collateral, its oracle valuation, the applicable borrowing limit, vault caps, and available liquidity. A larger collateral balance cannot overcome an exhausted lending vault or a binding borrow cap.

Loan-to-value, or LTV, expresses debt relative to collateral value. The borrow LTV limits risk-increasing actions, while the liquidation LTV governs liquidation eligibility. An oracle supplies the valuations used by the contracts. Its prices can differ from a price displayed elsewhere, so these checks use the oracle-derived collateral value rather than the value displayed elsewhere.

The liability vault is the vault that supplies the borrowed asset. Acting as a controller, it enforces the account’s collateral requirements through the EVC. Borrowing requires accepted collateral to support that account, and the resulting position must pass its checks.

A position can remain below its liquidation threshold yet fail a request for additional borrowing. Borrowing and liquidation limits answer different questions.

Interest costs and leveraged exposure

A lending vault’s configured interest-rate model determines borrowing costs; an EVK vault with no model configured uses a zero interest rate. Utilization measures how much supplied liquidity borrowers have taken. Models that respond to utilization generally make borrowing more expensive as liquidity tightens, although Euler also supports models with other inputs. Supplier returns reflect borrower interest, utilization, and configured fees; an annualized displayed yield is not a fixed payment.

Multiply adds leveraged exposure by borrowing a debt asset, swapping it into collateral, and supplying that collateral back into the position. The application prepares these actions together where a suitable route exists. The additional collateral comes with additional debt, so price changes and borrowing costs have a larger effect on equity.

Swap price impact and slippage also affect Multiply execution. Price impact describes how the trade itself changes its execution price. Slippage tolerance limits the adverse difference accepted between the quoted and executed amounts. A supported borrow pair does not establish that every requested multiplier or swap amount can execute.

Collateral shortfalls and liquidation losses

Liquidation becomes possible when the account reaches the liability vault’s liquidation threshold, subject to any configured cool-off period and other contract checks. Falling collateral prices, rising debt-asset prices, and accruing interest can reduce its margin. A healthy reading at opening does not fix that margin for the life of the loan.

The standard EVK liquidation discount increases as account health deteriorates, up to the vault’s configured maximum. A liquidator takes over debt and receives collateral under the mechanism’s rules. Available collateral limits the transfer, while market liquidity affects whether liquidators can manage the position economically.

Losses can also reach suppliers. If liquidation exhausts collateral and qualifying debt remains, the vault can distribute that loss across depositors when its configuration enables this behavior and the contract conditions hold. Collateral links therefore matter to a supplier even when that supplier has never borrowed.

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Governance powers and contract dependencies

Vault governance determines which risk settings authorized parties can change. The distinction between governed and finalized vaults affects parameter control, but neither label describes every dependency of a deposit.

Governed vault settings

A governor or risk curator can adjust supported parameters, such as collateral acceptance and borrowing limits. Those powers allow responses to changing conditions. They also expose positions to management decisions and the security of the accounts that hold authority. Pending changes and connected collateral configurations can matter alongside the vault’s existing settings.

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Finalized vault dependencies

A finalized vault has revoked its vault-level governor. Parameters controlled by that role can no longer change through it. Separate components may retain their own authority, however. A governed oracle router, connected collateral vault, or upgradeable deployment can still introduce changes. Finalization alone does not establish that the entire market is immutable.

Euler’s security work includes audits, formal verification, and deployment checks. These address particular code and implementation properties. They do not remove losses caused by collateral failure, inadequate liquidity, or a vault’s chosen configuration.

Supported positions and their different constraints

The available position types differ in what they hold and how they expose assets to borrowing. The following options describe supported configurations, rather than a universal set available for every token or deployment.

A non-borrowable vault prevents borrowers from taking its underlying assets from that vault. Using its shares to secure a separate loan still subjects the collateral position to liquidation rules. The distinction concerns asset use, not a general security certification.

Can you withdraw or undo a position at any time?

Withdrawals depend on available liquidity and applicable contract checks, and a confirmed transaction has no general undo function. Removing collateral also requires the remaining debt position to satisfy its limits. Repayment reduces debt; it does not automatically guarantee immediate withdrawal of every remaining asset.

To open a Borrow position in the Euler app, choose an accepted collateral-and-debt pair, enter the debt amount, and select collateral from wallet assets or an existing deposit where supported. Review the amounts, resulting health, LTV, rates, liquidity, and gas estimate. Reviewing an unsigned transaction leaves the proposed operation uncommitted. Token approvals and permits authorize spending and can precede borrowing, so review their permissions before signing them. After completing any required authorization, review the borrowing transaction and confirm it in your wallet only if its terms match your intent. After confirmation, reducing or closing exposure requires another supported operation with its own costs and conditions.

An insufficient-cash error means the requested borrow or withdrawal exceeds the vault’s available underlying liquidity. It differs from a collateral-health failure. Changing collateral does not directly replenish that vault’s cash, and repeatedly submitting the same amount does not remove the constraint. A smaller amount may fit existing liquidity; otherwise, availability must change.

The Euler app’s Portfolio separates direct deposits from Borrow and Multiply positions. Confirmed transaction status, recorded shares, outstanding debt, and collateral balances establish what the account actually holds. Any later reduction in liquidity or deterioration in account health can change the actions available.