RFC: Deploy Euler on Arbitrum

Title: Deploy Euler on Arbitrum

Author: @0scar_eth
Related Discussions: N/A
Submission Date: 18.1.2023
Simple Summary:
This is a pulse check with the Euler community to prioritize deploying Euler on Arbitrum once the ongoing audit (supply caps and eMode) is done. Goal of the proposal is to choose Arbitrum as the first expansion chain.

Arbitrum is already the largest Ethereum L2 and the 5th largest chain overall with over $1.1b in TVL, just shy of Polygon’s (according to Defillama). Among lending markets Aave v3 has deployed in Arbitrum and Radiant (fork of Aave v2) is the major native lending protocol.

However, Aave governance has been too slow to move relative to DeFi speed, both in terms of listing new assets as collateral and borrowable, and in risk management (as evidenced by their reaction to the CRV bad debt debacle). Popular native Arbitrum assets are missing from Aave (GMX, GLP, DPX, rDPX, GNS, gDAI, LUSD, wstETH, VST, VESTA, etc) and the permissionless nature of Euler can outcompete Aave for market share as any tradeable asset can be enabled as Isolated by default. On the other hand, Radiant relies on a 2/3 multi-sig that brings centralization concerns to larger capital allocators. Their TVL has sky rocketed due to their liquidity mining program so it is unsure what their “real” product-market fit is with an Aave fork.

There is a strong business case then for Euler to deploy on Arbitrum and outcompete the incumbents through permissionless. markets and greater risk management that Euler is known for.

For capital allocators:

  • Provide them with a battle-tested alternative for lending and borrowing with robust risk controls and wider breadth of borrowable assets

For Euler:

  • Quickly gain market share and grow protocol revenue by filling the current gap in the market
  • As other players build on Arbitrum, Euler can become the preferred source of liquidity due to its wider breadth of borrowable assets

Specification & Implementation
Collateral and cross assets would be decided by the DAO and after more discussion given that the same tokens (ex WBTC) across Ethereum and Arbitrum have different liquidity profiles and thus carry different risk.

EDIT: formatting

Although I hold different opinions personally about Arbitrum and BNBChain, my questions here would be the same as for deployment to any EVM mainnet. See my response to the BNBChain RFP (just replace “BNBChain” with “Arbitrum”, and soften the bridge concerns relative to BNBChain)

This is definitely a yes for me. As far as I can tell Euler has a low cost of horizontal scaling: probably most costs come from risk analysis and alerting infra. Having an Arbitrum deployment, and move faster than Aave is a must to take a big part of the market share (specially in “long tail” assets)

I would prefer to put this proposal on hold till Arbitrum native token is launched. No offense meant, but one of the reasons Arbitrum has the highest TVL among L2 atm is a massive drophunting campaign. In this regard, I fear that once token is launched the TVL could significantly decrease.

Hi all, it’s Peter from Offchain Labs, the company behind Arbitrum. We’re supporters of this proposal and have had a great experience working with the Euler team.

Euler has risen to #20 in terms of TVL on Ethereum, after only launching on mainnet on December 1st, and has an opportunity to make a big impact on Arbitrum One, which is quickly becoming the home for all things defi on Ethereum Layer 2.

Let’s work together to make this a success! If you ever have any questions, I can be reached via email (phaymond@offchainlabs.com).

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Arbitrum has a great eco-system with tangible volumes and community. It only makes sense to deploy there asap to capture a new range of users that’s not on Ethereum mainnet.

I would keep probably scrap permissionless-ness of Euler on Arbitrum given Univ3 twaps are unlikely to be in any way safe to use, and stick to main assets: WETH WSTETH USDT DAI USDC CBETH (once deployed).

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It makes sense to deploy here. Both Arbitrum and OP are only going to grow from here. But I think we need to do better than just launch with the “main assets”.

Where could we target?

GMX for example seems to have robust liquidity on Uni v3. There is good yield for token holders, especially those who have been compounding. This seems like a great opportunity for Euler to offer another venue for lenders and borrowers, especially those who want to hedge their positions but not sell GMX.

GLP is another story and is outside my remit. Maybe some larger, rougher brains in here could chime in.

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We support more efforts to onboard Euler to L2 networks such as Arbitrum.

As it grows in recognition and user base, Euler can serve as an oasis for new, curious users.

Love the push by @knightsemplar - which strategic assets will separate Euler from other competitors? Happy to look at some data to hopefully identify an answer.

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Hi @stechastic @phaymond I have two question that i have put to every chain advocate that has proposed for Euler deployment on their respective chain:

  1. How will your chain support Euler (marketing, engineering, liquidity, any other commitments, etc) before, during and after the deployment.

  2. What incentive can the chain provide Euler to help Euler incentivise user acquisition in your chain (arbitrum does not have a token currently so completely understand if this is not an option currently).