Euler DAO Input on EUL

Euler DAO Input on EUL

Disclosure: This forum thread is solely a place of discussion involving creating additional utility and functionality for the EUL token. This will not be moving to a vote or act as a signaling mechanism and is only to gather feedback from the community.

Community Input on EUL Utility

The Future of Euler Protocol discussion yielded many good ideas from DAO members regarding what they want the future of Euler Protocol to look like. This discussion hopes to identify what DAO members want to see from the EUL token.

Given the current downtime of the protocol, this opportunity can be used by the community to share ideas on how to innovate on the EUL token to bring more utility to its holders.

We would appreciate community feedback on what they would like to see from the EUL token. Below are some ideas of possible tokenomics models but feel free to suggest any other ideas.

EUL Currently

Currently, EUL serves as the governance token for Euler DAO with each token representing a vote in the DAO. The exact details of EUL can be found here

EUL Distribution Breakdown

EUL Unlock Schedule Breakdown

Possible Examples of Token Design

VE Model

Background: VE or vote escrow model is a popular tokenomics model. It involves holders locking up their EUL to receive veEUL which can be used to vote in the DAO and or receive rewards. The longer you elect to lock up your tokens, the more weight you receive for DAO voting power, staking rewards, and gauge voting. This model adds deeper liquidity to the protocol and helps ensure voters are longer-term committed to the protocol. More info can be found here.

Examples: BAL, CRV

Revenue Share

Background: Some protocols have recently added a revenue share design to their tokens. This model directs some portion of the fees generated by the protocol back to those who stake the token. This gives holders another reason to hold and helps to align incentives between protocol and token holders.

Examples: GMX, LDO


Background: Holding the native token gives users discounts or special access to parts of the protocol. For example, holding BNB tokens gives Binance users discounts on trading fees. This incentivizes users of the protocol to hold the token as it provides extra utility. However, it can be hard to identify a good way to add token utility into some protocols.

Examples: dYdX, BNB

Other Things To Consider

Incentive distributions: With the relaunch of Euler and the launch of new features such as EulerSwap the DAO should consider how to use EUL to attract liquidity and users to Euler

Technological Possibilities: Some of these tokenomics models may not be technically feasible. This process will also take time as this will involve new smart contracts. The community should recognize these changes cannot happen overnight and should be patient with their implementation.


I totally agree with giving more utility to the token and have been advocating it for a long time.
I agree with you on a veEUL system giving the ability to vote in the DAO, as for revenue sharing the lending protocol will never generate enough money to make it viable without it I think.
The idea of revenue sharing could be exploited with Euler Swap but this is just speculation as we know nothing about how it works.

As for its usefulness, I see baby euler as a way to make the token attractive.
From what I understand, baby euler would be something new and therefore quite exclusive, so it would be interesting to oblige for example those who use baby euler to hold a certain amount of EUL tokens for each value bracket the user wants to lend or borrow.
This would be active from a certain amount so as not to penalize small portfolios, for example it can be set up to block $1,000 or an other amount of EUL tokens if you want to lend/borrow more than $100,000.

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Thanks Matt, it’s good to have discussions like this in the open.

ve tokenomics work well with a very efficient bribe market (convex and Aurora). This needs to be very well thought out and planned if to go forward. I’m not a huge fan as I feel it’s a game that not everyone will be willing to play.

I like the GMX model of staking and receiving rev share in eth and esGMX that requires locking GMX to vest fully (over 1 year). This adds an extra layer of alignment.
Being on a layer 2 makes this much easier to claim and compound, something to bear in mind.

@Seini has a nice idea, but I would point out the lack of liquidity on the EUL token that is a huge barrier to entry for any participants. This must play a crucial role in any tokenomics change imo. An illiquid token isn’t a viable investment on the open market.

All in all, it’s hard to create or plan tokenomics changes without knowing the direction of the protocol.

I would also be very open to a change of token ticker and supply on the (potential) rebrand. Euler must rise like a Phoenix from the ashes.


I remain against the creation of a liquidity pool, or else a very controlled and well-defined liquidity upstream, with the possibility of withdrawing once a certain level is reached.
Too many times I’ve seen DeFi tokens destroyed by whales, especially if you want to incentivize deposits at relaunch it will be a disaster if there is too much liquidity: people will come to farm the token and will sell it right away.

I’m also in favour of modifying the token a bit, for example multiplying the supply by 10 or 100. Concerning a rebrand only the team can decide to modify the image of their baby or not imo but I also think it would be beneficial in the long run.

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@Matt_StableLab Thanks for taking the initiative once again.


In this post, I explain why Euler shouldn’t prioritize tokenomics. For v2, it’s suggested to allocate incentives towards (1) insurance fund, (2) grants and governance, and (3) ad-hoc liquidity at re-launch.


I’d like to share my skepticism regarding making a focus on tokenomics, especially at the current stage that Euler is undergoing. While I generally agree that a token is a great tool to prioritize incentives, grow the ecosystem, and decentralize a protocol, making an explicit focus on a tangled complex token model (1) distracts from the main product and (2) leads to inefficient capital allocation (e.g., revenue sharing, buyback-and-burn) instead of redirecting these resources to other activities that have higher ROI for project growth.

One may say that making token “attractive” (essentially pumping the price) can build a community, i.e. gud price → gud project → more users, however when the market goes in another direction (and it eventually does) – it’s a dead end. I don’t really believe that passive token holders who are mostly mercenaries and free riders bring any sustainable value to a project. Why think about the interests of an obscure token holder if the resources can be allocated to build a new product, provide a grant, hire a dev, etc?

Thankfully, we have the opportunity to look back at the past 3y of experience and conclude that most of these fancy tokenomics are a byproduct of DeFi 2.0 where not having enough fundamentals is compensated by a ponzi-like financial game to get attention and enrich early participants that eventually yield nothing long-term.

General principles

Nevertheless, a token is a powerful tool if designed and applied properly. When redesigning a token, I would suggest following such principles:

  1. Postpone token launch as much as possible. The best approach is to find a PMF and then launch a token to scale. Not really relevant to Euler because there is a token already. But considering the re-launch and potential tokenomics reset I’d suggest not overcomplicating the token model;

  2. Define the key protocol metrics/goals that the token should drive especially if it’s liquidity targeting

For Euler, I’d say these are:

  • Incentives towards risk minimization, e.g. Insurance fund. Growing and promoting TVL not having any recourse and backstop is fatal. Elaborated on this here;
  • Grants and governance. With grants, it’s pretty obvious that allocating resources to ecosystem growth has a very good ROI. This is hardly tokenomics per se, but just sound treasury management. As for the (on-chain) governance, a lot of people faded this narrative after a number of disappointments like Aragon and RFV riders, fei and rari drama, however, I’d say that the impact from community members and delegates at the mature projects is significant.
  • Ad-hoc incentives allocation at re-launch, new chain deployment, new collateral listing, etc. Not making this a long-lasting initiative; leave room to experiment and adapt.
  1. Not locking oneself into a rigid token model with little or no flexibility to adjust e.g, veTokenomic with 4y lockup;
  2. Not allocating incentives to gov token liquidity on DEXs. I guess no comments here;
  3. Avoid revenue sharing (will elaborate later on).

Models analysis

1. Revenue sharing
This is one of the hottest long-lasting discussion within the community, especially with the latest Lido proposal and the constant suspense of Uniswap fee switch. If at the beginning there were more proponents to share revenue because it seemed like a defi native revolutionary thing + validation from Curve, but now the general consensus leans towards the web2 model. Again, why allocate capital to the passive token holders where it’s hard to estimate ROI if it’s more efficient to reinvest in project growth?
Revenue sharing might make sense if: (1) the protocol is profitable and (2) there are no real opportunities to re-invest – which is not valid in both cases for defi projects. There are a few great latest analyses on this matter: 1, 2.

Yes, there are some contrary examples like Curve and GMX, however, I don’t think these models are really applicable.

2. Buyback-and-burn
The goal of this model also lies in token appreciation but via scarcity creation. So the general feedback for this model is similar to the previous one. But even if buying back, it’s better to allocate these funds to endeavors with the higher ROI.

3. VeTokenomics
This can be discussed for hours, however, I agree with @knightsemplar that it’s a very specific model that ultimately worked out ideally only for Curve and maybe for just a few projects more. There were many attempts to replicate this model for lending protocols and DOVs, but there was no success imo.

4. Utility
There were good examples provided by @Matt_StableLab that a token can be a tool for UX enhancement, however, I still don’t think that the token requires so much attention for not 80/20 moves right now.


As a general approach, I’d suggest not focusing a lot on complicated tokenomics to please token holders. It’s better to be the best protocol with the worst token like Uniswap, rather than have temporary clout as DeFi 2.0.

But considering that there is already a token that can add leverage at re-launch, I’d suggest considering the following ways to apply a token:

  1. Insurance fund, backstop, or any form of recourse to mitigate and/or transfer the insolvency risk (e.g., safety module). Also, such an attitude might bring back trust in a protocol more swiftly;
  2. Allocate funds to grant programs and governance/delegation;
  3. Ad-hoc liquidity incentives at the re-launch or deployment on new chains.

I hope you never have to fundraise haha…
I understand your point of view but the token holders are those who believe in your project so yes you have to make them happy by adding value to the token, as futile as it is.
You also have to build a community, not just a protocol.

It’s as if you were saying to a lot of small investors you can invest in my company but you will never have returns. Oh yes i forgat that you will be able to vote except that the VCs control the votes so in fact you can invest in my company but you will have nothing in return. How do you attract people with that?

It have to find a happy medium between the useful and the pleasant.

To be clear, I am very against the thought of an incentivised “pool 2”.

My thinking is and has been in the past, that the DAO should own some liquidity. Especially if we are launching our own DEX.

A nice 50:50 EUL:wstETH would suffice. End of the day the DAO treasury is full of EUL. Why not earn on the trading fees too?

I agree with you but it has to be really well done.
For example, it must be written in the governance proposal that the liquidity pool must never exceed a certain amount, as well as the removal of the pool once the token is listed on liquid CEXs.

Tokenomics should reflect the product and as long as we don’t have full clarity on the product. it’s pretty much pointless to do any discussion about tokenomics.

I’m a firm believer that usage and user behavior should define tokenomics and not price action. We should only construct tokenomics based on the those 2 factors

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I understand your point of view but I disagree, the truth is between the two.

Thank u @Matt_StableLab for starting the discussion. However I tend to agree with @patria, we need to see what we have before thinking about what utility could be added to a token. Atm we have just a paused protocol and it is very difficult to imagine what could be its token utility other than governance. In this regard I would focus more on your previous proposal regarding the future of the protocol

I totally agree as I said in my first message all that is said here are only ideas, where I do not agree it is in what Vadym says that the token can be used to nothing as long as the protocol is good, the two go together imo

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First off, thanks @Matt_StableLab for once again taking the initiative to promote constructive discussions on Euler.

I think the primary use for a DAO’s native token, and its distribution, is to decentralise the decision-making process which aims to govern and improve the DAO and protocol issuing it. However, it seems like most of the ideas suggested so far pertain to tokenomics.

Tokenomics is important and shouldn’t be neglected in Euler. However, I agree with @vadym and @patria. I don’t think a discussion and an amendment of EUL’s tokenomics should be prioritized right now. I don’t think the community has ever signalled that it was insufficient in its role in helping realise Euler’s goals.

I also think that discussions on the value of EUL should only be relevant when discussing plans for protocol/DAO spending. However, if the treasury’s health is a concern to the community, then a discussion on how to diversify the treasury’s holdings may be worth having or a discussion on DAO-managed investment vehicles could be worth having instead.

The looming possibility of regulation drastically changing the DeFi landscape should also be considered when making changes to tokenomics.

And finally, like @Matt_StableLab says

it may also potentially increase Euler’s attack surface for malicious governance participants and black hats.

Euler should instead prioritise attracting professionals from various but relevant backgrounds for managing protocol params. Any additional utility added on to EUL should support this goal.

I would instead suggest that Euler allow support for LP tokens to be used in voting. A list of reasons why this would be beneficial for Euler:

  • Can attract potential contributors who have been longtime supporters of Euler

It can be argued that Liquidity Providers provides an entrypoint for DAO Governance. Providing liquidity for EUL allows for new contributors to gain voting power (vp) within Euler w/o any shady or potentially non futureproof (regulation) OTC deals.

  • Can incentivise liquidity provisioning

This allows for longtime voters/delegatees to accrue rewards for providing liquidity for EUL w/o losing (significant) vp.

  • Can incentivise DAO contributors

This allows for longtime contributors of Euler DAO to accrue rewards whilst performing their work as a contributor (aka active and public delegates).

  • Gives the treasury a chance to earn revenue

Euler DAO can propose to deploy liquidity to a DEX and earn fees as revenue w/o losing (significant) vp. This revenue can possibly be compounded if…

  • LP derivative tokens can (also) be used to vote

AKA utilising vault tokens as a governance token. e.g. If mooTokens were supported, LPs can earn compounded fees on their staked LP token(s) whilst still participating in governance.

  • Requires minimal code to implement, minimal changes to governance

If the community would also like to allow LPs to vote on chain, logic for upgrading the governance contracts would need to be implemented. The DAO would also take on additional responsibilities for adding, removing and pausing additional governance tokens (i.e. apart from EUL).

Possible issues with this suggestion are the possibility of attracting a malicious cartel of voters whose sole aim is to extract value from the Treasury, or to speculate on the value of EUL.

The DAO would also have to carefully plan out the event that a fast track proposal may be required to pause or remove additional governance tokens if on-chain support is added.

Ultimately, as I mentioned

Euler should […] prioritise attracting professionals from various but relevant backgrounds for managing protocol params. Any additional utility added on to EUL should support this goal.

So I encourage anyone to challenge my points advocating for supporting LP tokens for voting with this in mind.


@Matt_StableLab thanks again for all you do and thanks to the Euler team, cant wait for the next chapter.

I would support any other way to bring utility to the Euler token minus the "Ve’ mode. Just because CRV and Bal have been successful with the “Ve” model doesnt mean it will be successful on a lending platform, these are completely different things. Be unique Euler, again dont follow the herd and do something because its trendy but standout. I understand you want long term holders that are committed to Euler but making them lock token for 4 years on a lending platform is not feasible imo. Maybe for EulerSwap, i can understand but still be unique.

Lastly, i think there is no need to rebrand Euler . You have to keep the name to show how you fought despite all odds, even with a new baby and threats to you, yet you stood and fought and made sure it got sorted out and that everyone was made whole. Thats a big history right there, changing it or rebranding will really be sad and a failure. you cant throw a way such history. as for the supply, i still think there is no need to change, all that should be focused on is bringing back the protocol and adding more utility to the token. Cheers

A wise man once said you can’t put the toothpaste back in the tube. In this context, it’s more that I’d like to see more innovative design around governance on protocols with no governance token, but in this case, EUL exists already.

The two most significant stakeholders in a lending protocol are the depositors and the borrowers. The governance token is really something that gets pushed in and tries to find something to do.

I wonder how a governance model would work where you try to leverage the LDO / stETH dual governance model here.

  • EUL would be the governance initiator that can create proposals; and
  • LP tokens of depositors and borrowers can veto a proposal.

I imagine there’d have to be some tweaking for weighting per token (for depositors and borrowers), but I do think that the most important thing is to have a good protocol first, and the token will slowly become good if it has some form of value capture.

That’s a very interesting point there, implementing “dual governance”, as Lido puts it, into Euler DAO.

In Lido’s case, I think this mode of governance makes sense for them since LDO holders would’ve otherwise hold absolute power over stETH holders and its underlying asset. There was a clear principle-agent problem between these two groups.

Therefore, for Euler, the equivalent of stETH would probably be eTokens (e.g. from Collateral Tier), instead of LP tokens. Though, to simplify the governance process, Euler can allow eToken holders to stake their tokens for a single stEtoken (or whatever) which would be the secondary governance token.

For any of these solutions though, would it really improve the governance process? Would it encourage professional contribution to the DAO? Would it at least increase voter participation? And of course, can it be implemented without increasing Euler DAO’s attack vector?

These are important points to consider when amending DAO governance and tokenomics. Right now, I’m alternating between “no” and “not sure” for these questions (for both LP and stEtoken solutions) but some further research on these questions may yield useful results.

just a question, does this EULER DAO thing really fit EVC?

Seems EVC is kinda more flexible…DAO is not that needed?