Euler Finance is a DeFi lending platform deployed on Ethereum. Launched in December 2021, the platform obtains prices through the price oracle of Uniswap v3, with "Permissionless Listing" of assets as its core highlight. Next, we’ll take a closer look at Euler Finance’s innovations in lending products.

What is "Permissionless Listing" Listing)?

In some early crypto lending projects, assets must be approved by governance framework voting before they can be listed. In other words, "whether assets can be listed and participate in transactions" requires permission. . For example, for the Aave platform, only assets voted by $AAVE holders can be listed, thus having a lending market on the platform.

On the Euler Finance platform, users can decide for themselves what tokens to list and establish related lending markets - as long as this token has a WETH trading pair on Uniswap v3. On the one hand, this mechanism enriches transaction targets and promotes the growth of lending demand on the platform, but on the other hand, it also unsurprisingly brings high risks due to the "zero threshold".

Therefore, Euler Finance adopts the Asset Tiers mechanism to improve the risk management of the platform.

How does the asset class mechanism work?

Euler Finance divides crypto assets in lending into three levels, or layers (Layer), namely isolation layer assets (high-risk assets), cross-layer assets (medium-risk assets) assets), and collateral layer assets (low-risk assets). Their definitions and specific differences are shown in the table below.

It is not difficult to see that the isolation layer assets of "unrestricted listing" have the highest risk and therefore cannot be used as collateral for loans. collateral to avoid liquidation caused by a sharp drop in the value of the collateral. The lowest-risk crypto assets, such as ETH, USDC, and most stablecoins, are collateral-layer assets.

In addition, although layered mechanisms help protect asset lenders and control platform risks, they will bring new user experience issues. Once Bob's account borrows an asset in the isolation layer, his account is locked and cannot borrow other assets; if he wants to borrow more assets, he must create a separate wallet and provide funds. This situation is particularly troublesome for users using hardware wallets.

For this purpose, Euler Finance supports the concept of "sub-accounts". Each Ethereum account can create up to 256 sub-accounts (including the main account) on the platform to manage multiple positions more conveniently and concisely.