Euler (EUL): DeFi's phoenix? - Analyst Notes #3 with Michael Bentley

Introduction & Context

With the growing number of interviews, podcasts, and Spaces on X, some interviews fly under the radar, are incomplete, or don’t receive the attention they deserve. The goal of Analyst Notes is to provide users with a clearer way to find key takeaways, contextual information, and fact checks of select interviews.

Michael Bentley, CEO of Euler and former researcher at Oxford, starts the interview by sharing his background in the crypto ecosystem. Initially skeptical in 2015, he began exploring blockchain more seriously in 2017.

His journey began with experimentation, running masternodes and developing trading bots for EtherDelta and Idex — some of the first decentralized exchanges in the ecosystem.

In 2020, he launched Euler during a hackathon, with the goal of creating a DeFi lending protocol based on a more dynamic interest rate model than what was available at the time. The project won the hackathon, quickly attracting attention from several VCs.

If you find the article interesting, feel free to watch the full interview on the Decrypted channel and support them on their X account.

→ Watch the full video of the interview :

https://www.youtube.com/watch?v=IzaeQibaXQI

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Analyst Notes

Note 1: Fact-checking Euler’s fundraising rounds

CONTEXT

At 3:50, Artem asks whether Euler was backed by venture capital. Michael confirms, explaining that the first round — initially unplanned — was led by Lemniscap. At the time, Euler was still a passion project that drew interest from professional investors.

FACT CHECK

Euler’s first fundraising round took place in December 2020 (Seed), raising $800,000 from CMT Digital, Divergence Ventures, Cluster Capital, Launchub Ventures, Block0, and several angel investors. Lemniscap led the round. This is the one referenced by Michael.

The second round occurred in August 2021 (Series A), with $8 million raised from CMT Digital, Divergence Ventures, Lemniscap, Doubletop, and angel investors. Paradigm led this round.

The third round was in June 2022, raising $32 million from Coinbase Ventures, Jump Crypto, Jane Street Capital, Uniswap Labs Ventures, and FTX Ventures. Haun Ventures led that round.

Finally, a fourth round was raised in April 2025. The amount was not disclosed. This information comes directly from Wintermute’s Twitter account, one of the leading market makers in the ecosystem.

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Note 2: Opinion Highlight

CONTEXT

At 5:00, Artem asks Michael about the importance of a token’s price in a protocol’s success. Michael responds that price plays a major role in adoption since a high valuation helps reward users and accelerate growth. After Euler’s relaunch, this became a challenge, as the token was heavily devalued, limiting its incentivization capabilities.

QUOTE

"The reality is that tokens matter, and the price of tokens matters a lot more than it should. As an industry, we’re still trying to figure out the best way to launch a token. They are extremely powerful bootstrapping mechanisms. They allow projects to go from 0 to 1 very fast, assuming the product is also good."

"I think overall, it’s a good thing. They also allow democratized access to startup investing. Normally, that would be reserved for private capital over many years. But here, you can have a brilliant idea tomorrow and raise from a global investor base."

"Does price matter? Yes, it kind of does. (...) When a token is devalued, the bootstrapping mechanism it provides becomes much harder to leverage. For tokens that have high value, it allows them to distribute a part of this value.”

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Note 3: Euler’s Fee Flow Model

CONTEXT

At 9:53, Joestar brings up buyback strategies and the lack of treasury diversification in DeFi. Michael explains that while buybacks can help by removing supply, they’re often overrated. He believes the strongest businesses are those that reinvest revenue into growth instead of redistributing it immediately.

He then introduces Euler’s Fee Flow model: an auction mechanism where protocol revenues are sold in exchange for EUL. This creates direct buy pressure, since participants must purchase EUL to join the auctions.

Moreover, Euler’s “fee switch” is not yet enabled. The protocol currently generates only a few million dollars per year, but this figure could rise quickly with increased activity.

Rather than passively accumulating fees in a multi-asset treasury, Euler automates their conversion into a single target asset via the Fee Flow model. A simple, elegant mechanism — and a differentiating factor in the DeFi ecosystem.

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Note 4: Treasury management and crisis resilience

CONTEXT

At 14:30, Artem raises the issue of protocols whose treasuries are mainly composed of their own native token. In the current cycle, it’s common to see protocols using a portion of their revenue to buy back their token on the open market.

The issue, according to Michael, is that this approach offers poor crisis management. In the event of a hack or major incident requiring user refunds, a treasury overexposed to its native token can make things worse. The financial health of the protocol becomes directly tied to the token’s price, increasing the risks for holders.

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Note 5: The rEUL program and incentive design

CONTEXT

At 19:35, Artem asks Michael about Euler’s incentive model, in relation to the recent TVL increase and Twitter debates with Marc Zeller (Aave) regarding the effectiveness of incentives in DeFi.

The discussion is available here:

Michael confirms that Euler does have an incentive program called Reward Euler (rEUL), designed to distribute rewards with a 6-month vesting period. The idea is to mitigate aggressive yield farming behavior, where users farm and instantly dump tokens.

The DAO initially allocated 5% of total token supply to the program, worth around $3–4 million at launch, now closer to $10 million with the token’s rise.

→ You can read our deep-dive article here:

Michael also notes that this is a relatively small incentive program. He emphasizes that these rewards are strictly for users and not part of Euler’s operational expenses.

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Note 6: Euler’s path to profitability

CONTEXT

At 26:00, Joestar asks about Euler’s current profitability and what it would take to break even.

QUOTE

"I think Euler Swap which we announced recently is very promising in this regard. Lending protocols is no secret, take a lot before they can generate decent returns. Euler is not profitable, there is no hiding, it’s still the case. But neither was Aave for many years. (...) And it’s taken many years for Aave to get to that level of profitability.

How much would it take to be profitable? If you don’t include token incentives, 7 Million is the cost of running the DAO inclusive of all its services and providers. If you include token incentives, then it varies from 3 to 10 Million depending on the price of the token. So probably $15 Million annualized on average."

Michael adds that Euler’s profitability will mostly depend on volumes from Euler Swap and the lending platform. In his view, swap protocols are structurally more profitable due to high volume. Therefore, Euler Swap is more likely to be the key to reaching break-even.

He concludes that both products — Euler Swap and Euler Markets — are complementary, and only one needs to be profitable for the overall protocol to be sustainable.

→ For more details on Euler’s products:

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Note 7: Highlight on Euler’s modular architecture

CONTEXT

At 41:30, Michael discusses Euler’s modular architecture and the potential drawbacks it brings.

QUOTE

"Unlike DEXes that you can deploy anywhere. If there is no liquidity, the DEX doesn’t care. If there is volatility, the DEX doesn’t care. (...) Lending protocols don’t work like that and they are very sensitive to the environment that they are surrounded by and the integrations they have with other protocols. So if there is no DEX liquidity, liquidations get harder on the lending protocols. It’s one reason why having a lending protocol on many networks gets harder"

"Lenders need to be more aware of the risks and the networks where the liquidity is thinner."

Michael also emphasizes that Euler is an infrastructure layer and that the DAO does not deploy all markets directly. While modularity offers flexibility, it also requires stronger coordination across the ecosystem’s components.

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Conclusion

This interview offers valuable insight into Michael Bentley’s strategic vision and the structure of Euler V2. To better understand the protocol’s decisions and the debates they spark, we encourage you to watch the full interview on Decrypted’s YouTube channel.