Euler Finance (EUL) – From Hack to DeFi Lending Powerhouse: Yield Farming, Tokenomics & 2025 Investor Guide

Aug 30, 2025

7 min read

Euler Finance - DEFI Lending and Looping Protocol

Discover how Euler Finance (EUL), a modular DeFi lending protocol, rose from a $197M hack to $3B TVL. This crypto deep dive covers tokenomics, yield farming strategies, governance, risks, and how DeFi investors can profit in 2025.

Introduction: The Rebirth of a DeFi Lending Giant

In DeFi, survival stories are rare. When protocols are hacked, they usually bleed out—TVL collapses, trust evaporates, and users move on.

But Euler Finance (EUL) did the impossible.

Once written off after losing $197M in a single exploit in 2023, Euler came back stronger. By August 2025, it boasts ~$3B in TVL, making it one of the top 10 crypto lending protocols in decentralized finance.

If Aave is the “Amazon” of lending—huge, standardized, and dominant—then Euler is the Apple App Store of credit markets. Instead of forcing users into rigid pools, Euler lets builders create custom lending vaults for everything from liquid staking tokens (LSTs) to real-world assets (RWAs) and restaking derivatives.

For DeFi investors and yield farmers, this modularity opens up powerful strategies:

Traditional lending for steady APY.
Looping for leveraged yield farming.
Borrowing against collateral while staying long ETH.
Incentive farming on new chains like Base, Sonic, and Linea.

Euler is more than just a comeback—it’s a DeFi yield playground in the 2025 bull run.

Euler Finance (EUL) at a Glance (Aug 2025)

Metric	Value
Price (EUL)	≈ $10
Market Cap	≈ $186–198M
FDV	≈ $271M
Circulating / Max Supply	~19.7–19.8M / 27.18M
TVL / Borrowed	$2.991B / $1.499B
30d Fees / Revenue	$8.18M / $0.49M
Q3-to-date Earnings (2025)	−$1.25M
Security	OpenZeppelin audits, Gauntlet risk modeling, $5M bug bounty
Unique Features	EVK (vault kit), EVC (vault connector), Fee Flow

The Day Euler Almost Died: The 2023 Hack

March 2023 was supposed to be just another week in DeFi. Instead, it became the day Euler nearly died.

An attacker exploited Euler’s liquidation logic and drained $197M—making it one of the largest crypto lending protocol hacks in history. Within hours:

Euler’s TVL collapsed from $300M+ to near-zero.
Headlines declared Euler dead.
Community confidence shattered.

Most protocols never recover from such devastation. But Euler wasn’t most protocols.

The Bad & Ugly

Reputation destroyed.
TVL evaporated.
Users feared funds lost forever.

The Good

Against all odds:

The hacker returned ~90% of the stolen funds after negotiations.
Euler rebuilt community trust.
Instead of shutting down, the team doubled down on security and decentralization.

What Changed After the Hack

Fresh Audits → EVK audited by OpenZeppelin, EVC independently audited.
Massive Bug Bounty → Up to $5M for vulnerabilities.
Risk Modeling Partner → Gauntlet onboarded to optimize collateral/parameters.
DAO Power → Greater governance over vault listings and incentive programs.

➡️ What could have been Euler’s funeral transformed into a celebration of his legacy. Instead of mourning his passing, people chose to honor his contributions to mathematics. This event marked a significant rebirth of interest in his work and ideas.

Euler’s TVL Journey: Collapse to Comeback

Euler’s Total Value Locked (TVL) tells the story of resilience:

Period	TVL	Commentary
Early 2022	$300M+	Pre-hack growth.
Mar 2023	Near-zero	$197M hack.
Late 2023	<$50M	Community rebuilding.
Mid 2024	$200–400M	V2 relaunch with modular vaults.
Late 2024	$700M–1B	Growth via incentives + Base/Sonic launch.
Aug 2025	$3.0B	Among top 10 DeFi lenders.

From near-death to 5x TVL growth in one year, Euler is a case study in how DeFi innovation + strong community = survival.

Protocol Architecture: EVK, EVC & Fee Flow

EVK (Euler Vault Kit): Permissionless vault deployment with custom oracles, hooks, and risk models.
EVC (Ethereum Vault Connector): Unlocks cross-vault collateralization for capital efficiency.
Fee Flow: Distributes protocol fees into auctions and rewards, aligning lenders, borrowers, builders, and the DAO.

Governance & Tokenomics (EUL)

Token Supply: Max 27.18M, ~19.7M circulating.
Market Cap vs FDV: $186M vs $271M.
Utility: Governance, Fee Flow participation, liquidity incentives.
Governance: DAO-led, with curators managing vaults and parameters.
Valuation Context: Far smaller than Aave (~$1.5B FDV) and Compound (~$1B FDV) → high upside if adoption sustains.

Investor Guide: Yield Farming on Euler

Here’s how crypto yield farmers can use Euler today:

1. Standard Lending

Deposit ETH, stETH, or stablecoins.
Earn 3–6% APY.
Low risk, beginner-friendly.

2. Borrow Against Collateral

Deposit stETH → borrow USDC → farm elsewhere.
Stay long ETH while farming yield.
6–12% APY.

3. Looping Strategy (Leveraged Yield Farming)

Deposit stETH → borrow USDC → buy more stETH → redeposit.
Repeat 3–5x.
15–25%+ APY with liquidation risk.

4. Incentive Farming on New Chains

Euler incentivizes vaults on Base, Sonic, Linea.
Early adopters earn 10–30%+ APY.

5. Builder Vaults (Narrative Plays)

Examples: Usual’s USL ($170M deposits in 3 weeks).
Niche vaults tied to LRTs, RWAs, or experimental strategies.

Visual Yield Farming Strategy Table

Strategy	Risk	Complexity	Yield	Best Fit
Lending (ETH/USDC)	Low	Easy	3–6%	Beginners
Borrow vs Collateral	Medium	Moderate	6–12%	ETH bulls
Looping (Leverage)	High	Advanced	15–25%+	Degens
Incentive Farming	Medium	Moderate	10–30%+	Opportunists
Strategy Vaults	Medium–High	Moderate	Narrative-driven	Builders

Investment Thesis: Why Euler Matters in 2025

Modular Infrastructure → Permissionless vault creation, fast asset onboarding.
Multichain First-Mover → Base, Sonic, Swell, BOB, Linea.
Fee Generation vs Valuation → $8M+ monthly fees vs <$300M FDV.
Post-Hack Security Credibility → Audits, bug bounty, Gauntlet.
Asymmetric Upside → Mid-cap with higher growth potential than Aave/Compound.

🔥 Perfect — let’s add a competitor comparison chart so readers can instantly see how Euler Finance (EUL) stacks up against Aave, Morpho, Compound, and Spark. This section will be SEO-optimized for DeFi lending protocol comparisons and very visual for yield farmers.

How Euler Compares to Other DeFi Lending Protocols

In crypto, context matters. To understand Euler’s unique positioning, let’s compare it against the four biggest lending competitors:

Aave → the DeFi blue-chip giant.
Compound → the pioneer, now slower-moving.
Morpho Blue → fast-growing isolated market design.
Spark (by MakerDAO) → focused on DAI & Maker ecosystem.

Comparison: DeFi Lending Protocols (Aug 2025)

Protocol	TVL	FDV	Market Design	Multichain Reach	Incentives	Strengths	Weaknesses
Euler Finance (EUL)	$3.0B	$271M	Modular vaults (EVK + EVC)	Base, Sonic, Linea, BOB, Swell	Aggressive EUL rewards	Permissionless markets, cross-vault collateral, high flexibility	Still subsidizing growth, fragmented liquidity
Aave (AAVE)	$40B+	$1.5B+	Shared pool w/ risk isolation	10+ chains (Ethereum, Polygon, Arbitrum, etc.)	Limited, mostly organic	Blue-chip liquidity, huge adoption	Slower innovation, governance heavy
Morpho Blue	$7B+	~$600–700M	Isolated vaults via partners	Ethereum + L2 adoption growing	Protocol + partner rewards	Efficient matching, strong growth	Dependent on partner vault builders
Compound (COMP)	$2–3B	~$1B	Shared pool	Mostly Ethereum + limited L2s	Minimal	First-mover credibility, security	Declining relevance, slow updates
Spark Protocol	$1.5–2B	N/A (DAO-driven, part of Maker)	DAI-focused lending	Ethereum mainnet	Maker incentives	Strong tie to Maker/DAI, low-risk	Limited assets, not permissionless

Key Takeaways for Yield Farmers

Euler vs Aave: Aave dominates with scale, but Euler wins on modularity and multichain speed.
Euler vs Morpho: Both focus on vaults, but Euler’s cross-vault collateralization (EVC) gives it more capital efficiency.
Euler vs Compound: Euler is more innovative, while Compound feels like a legacy lender.
Euler vs Spark: Spark is DAI-centric, Euler is permissionless and multi-asset, offering more yield variety.

Why Euler’s Edge Matters in DeFi Yield Farming

For crypto yield farmers, the advantage is clear:

More flexibility: Farm in vaults tied to LSTs, RWAs, LRTs, or stablecoins.
Higher APYs (with risk): Incentive farming + looping boost yields beyond Aave/Compound.
Narrative positioning: Euler thrives in new chain ecosystems where incumbents are slower to launch.

In short, Euler offers higher-risk, higher-reward opportunities compared to Aave’s stability or Spark’s conservatism.

Risks for DeFi Investors

Competition: Lots of competition in the Defi Space
Incentive Sustainability: Net earnings negative (−$1.25M Q3).
Smart Contract Risk: Exploit history, though hardened since.
Liquidity Fragmentation: Too many vaults = thinner markets.
Governance Capture: Sub-$300M FDV = concentrated power risk.

FAQs: Euler Finance & Yield Farming

1. What is Euler Finance in DeFi?Euler is a modular crypto lending protocol where anyone can create lending markets via vaults, unlike Aave’s centralized pool design.

2. Is Euler safe after the 2023 hack?Yes, Euler rebounded with fresh audits, a $5M bug bounty, and Gauntlet as a risk partner. While no DeFi is 100% safe, its security posture is now one of the strongest.

3. How can I use Euler for crypto yield farming?You can lend, borrow against collateral, loop positions, or farm incentives in vaults across Base, Sonic, and Linea.

4. What’s the looping strategy on Euler?Looping means depositing collateral (like stETH), borrowing against it, rebuying stETH, and redepositing multiple times for leveraged yield.

5. How does Euler compare to Aave or Compound?Euler is smaller but more flexible, enabling permissionless vault creation and faster adoption of new DeFi assets.

6. Does the EUL token capture value?Yes—through governance, Fee Flow auctions, and incentive alignment, though value capture depends on DAO decisions.

7. What’s the biggest risk with Euler?Over-reliance on incentives. If adoption slows and rewards dry up, yields drop sharply.

Final Thoughts: From Hack to Yield Playground

Euler Finance is proof that DeFi protocols can rise from the ashes. What looked like a fatal hack in 2023 became the catalyst for a stronger, modular, more resilient lending protocol.

In 2025, Euler is:

A yield playground for DeFi investors.
A builder’s platform for custom vaults.
A mid-cap token with upside if adoption continues.

For crypto yield farmers, Euler is not just another lending app—it’s a gateway to advanced strategies like looping, incentive farming, and collateralized borrowing.

It carries risk, but in this bull cycle, Euler Finance (EUL) stands out as a compcompelling mid-cap plays in DeFi.

NOTE: This is not one that I hold, but I do use their protocol.

DISCLAIMER: The information contained herein is for entertainment and informational purposes only and not to be construed as financial, legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading cryptocurrencies and defi poses considerable risk of capital loss. The speaker does not guarantee any particular outcome. © 2025 DAD DEFI SPACE

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