Author: Euler Labs
Category: Protocol
Date submitted: 29th April 2026
Summary
Euler Labs recommends that the Euler DAO reduce protocol fees to 0% across all live and future deployments until protocol scale and curator adoption justify reintroducing fees through a future governance proposal.
At Euler’s current scale, protocol fees generate modest revenue while adding a cost layer for curators and integrators evaluating Euler as lending infrastructure.
This proposal asks the DAO to align protocol economics with Euler’s current infrastructure strategy. Fee Flow would remain paused while protocol fees are set to zero, and the DAO would retain the ability to reintroduce fees through future governance when scale justifies it.
Motivation
Euler is lending infrastructure. That is the strategic direction outlined in Euler Labs’ Q1 retrospective, and it changes how protocol economics should be evaluated.
Infrastructure adoption depends on curators, builders, and institutions choosing Euler as the base layer for their own markets. Fees are part of that decision. When competing infrastructure operates with no protocol fee, Euler’s fee layer affects market competitiveness before the protocol has reached critical adoption.
The Q1 retrospective stated this directly:
At Euler’s current scale, protocol fees generate modest revenue while creating a meaningful cost disadvantage relative to competing infrastructure.
Growth should come before monetization.
Background
Euler V2 was designed as lending infrastructure: modular vaults, configurable risk parameters, opt-in collateral relationships through the EVC, and market design controlled by curators and builders.
Euler Labs is now focusing the protocol around that infrastructure model. The Euler app becomes a distribution layer for curator-managed and immutable vaults. Curators operate the markets. Euler provides the rails.
Protocol fees should match that model. Reducing them to zero supports continued adoption while the infrastructure layer scales.
Specification
If approved, this proposal authorizes the DAO to reduce protocol fees to 0% across Euler lending markets where protocol fees are currently active.
The implementation should:
- Set applicable protocol fee parameters to 0%.
- Prevent new protocol fee accrual while fees remain set to 0%.
- Keep Fee Flow paused while protocol fees are inactive.
- Leave curator fee settings, vault accounting, and user positions otherwise unchanged.
- Preserve the DAO’s ability to reintroduce protocol fees through a future governance proposal.
Rationale
Curator adoption is the priority
Euler’s infrastructure thesis depends on curators building markets on top of the protocol.
Curators compare venues by liquidity, reliability, tooling, distribution, and economics. Fees affect that comparison and can reduce market competitiveness.
Setting fees to zero improves the economics for curators and the users they serve.
Protocol revenue is not yet the constraint
At current scale, protocol fees are not the primary driver of Euler’s sustainability.
Euler Labs has stated that it has sufficient runway to sustain development through this transition and is actively working to strengthen its position further. The current priority is adoption.
The DAO should optimize for more high-quality markets, more curator engagement, and more usage of Euler infrastructure.
Fee Flow remains available
Fee Flow is an innovative fee auction mechanism. This proposal does not retire it.
While protocol fees are set to zero, Fee Flow should remain paused. If a future DAO proposal reintroduces fees, Fee Flow can be reactivated alongside them when protocol scale justifies it.
Future fee reactivation
Reducing fees now does not mean Euler should never monetize.
The Q1 retrospective notes that Euler Labs expects to propose a scoped protocol upgrade that would give the DAO clearer tools to reintroduce and enforce fees in the future. That upgrade is separate from this immediate proposal and should receive its own discussion.
This proposal is a growth decision. It lowers fees now so Euler can compete for infrastructure adoption, while leaving monetization available when the protocol has reached the scale to support it.
Impact
Expected benefits:
- Better economics for curators deploying on Euler.
- Lower cost for integrators building on Euler infrastructure.
- Stronger competitiveness relative to zero-fee lending infrastructure.
- Clearer alignment with Euler’s infrastructure strategy.
- Simpler external messaging for curators and institutions.
Expected tradeoff:
- The DAO receives less protocol fee revenue while fees remain set to 0%.
Euler Labs believes this tradeoff is appropriate at the current stage. The revenue currently generated is modest, while fee reduction supports the protocol’s current growth priority.
Risks and Considerations
Reduced DAO revenue
The DAO will receive less protocol revenue while fees are set to zero.
This is the central tradeoff of the proposal. Euler Labs believes the adoption benefit outweighs the revenue reduction.
Future reactivation requires governance
Protocol fees should only be reintroduced through a future DAO proposal.
Any future proposal should include the expected revenue impact, curator impact, affected markets, Fee Flow configuration, and any required governance or protocol changes.
Fee enforcement limitations
The Q1 retrospective notes a structural limitation: after fees are lowered, the DAO currently has no way to enforce a minimum fee on existing vaults.
Euler Labs expects to propose a scoped protocol upgrade to address this. That upgrade is not part of this proposal and should be evaluated separately.
Implementation Plan
If the DAO approves this proposal, Euler Labs will coordinate the execution payload through the existing governance process.
Before execution, Euler Labs will publish the affected markets and transaction details for community review.
Execution should proceed only after the payload has been reviewed and the DAO has approved the change.
Conclusion
Euler’s current priority is infrastructure adoption.
Protocol fees generate modest revenue today while affecting competitiveness for curators and integrators evaluating Euler as lending infrastructure. Reducing fees to zero aligns protocol economics with the strategy set out in the Q1 retrospective: grow the infrastructure layer first, monetize when scale justifies it.
Euler Labs recommends that the DAO reduce protocol fees to 0% for the foreseeable future and keep Fee Flow paused while fees remain inactive.