BSC News caught up with Euler Labs COO Brandon Neal at the recent Mainnet summit. What is Euler doing to earn their reputation as the “adults in the room?”
Having spent a decade at the Federal Reserve Bank of New York, Euler Labs COO Brandon Neal had a front row seat to the workings of the traditional finance world. Managing the U.S. Treasury Auction Desk, he was in the thick of operationalizing central bank monetary policy before deciding to join Euler Labs in January this year.
Neal got excited by the potential of Decentralized Finance (DeFi) following a discussion with Dave White of Paradigm Ventures, an investor in Euler Labs.
Working at the Fed made him realize how important borrowing and lending markets are to the health of the monetary system. He believes the permissionless aspect of DeFi has the potential to solve a lot of the problems associated with traditional lending markets.
He said that DeFi could be “the new financial plumbing” which serves the underbanked and delivers fairer market mechanisms that disincentivize the “rent-seeking” behavior of financial institutions.
Euler.Finance, the first app launched by the company on Ethereum in December 2021, is a permissionless lending protocol built to help users lend and borrow almost any asset. Neal recognizes that Euler is “standing on the shoulders of giants” – building on the back of the first and second (V1 & V2) generations of lending protocols dominated by Compound and Aave.
Even during this bear market, Euler has been growing.
.@eulerfinance's key metrics have been #uponly over the last 30 days with metrics like deposits, withdrawals, borrow volume, and TVL all up from the previous month.
But what is driving this traction? ? pic.twitter.com/Vic7T1Qwws
Brandon Neal attributes Euler’s success to its carefully constructed products and thinks DeFi is really in need of “thoughtful, serious” builders who can help raise the level of trust in the industry.
Euler’s app is designed with risk management as a primary concern. Industry watchers believe DeFi is currently in a “testnet” phase and will certainly evolve further – but what does the Euler COO think are the changes that will attract a critical mass of people to move from TradFi to DeFi – both at the retail and institutional level?
In these still-early days for the industry, those kinds of crosscurrents are impeding further adoption. He views the bear market as a benefit for the sector in the long run – because “two-way markets are healthier” than markets that always go up. “For broader adoption I think there need to be real-world asset use cases,” he said.
Elaborating upon the larger TradFi-DeFi debate, Neal refers to his analogy of finance as the oil greasing the wheels of the economy. He asks what is the oil greasing right now?
A vision of the future where everyone can access financial markets is what makes DeFi’s role crucial:
Having real world assets interface with DeFi is going to be valuable, he believes. Jurisdictions such as Wyoming are already experimenting with tokenized mortgages, helping to blur the boundary between TradFi and DeFi.
Another major use case where DeFi can play a potential role is concerning digital content creators and artists, etc. Content creators who rely on the giant tech platforms to host their content have helped the Web2 tech giants to grow into very powerful middle men.
Seems to me that digital creatives are the most likely to bring their assets on-chain *before* other RWAs come to web3. After all, large web2 platform tech cos stand between them and their fans, extracting exorbitant tolls and potentially censoring speech that should be free. https://t.co/fMIxMyTel8
Neal views Euler as the third generation (v3) of DeFi and outlines the differences that have helped Euler improve on v1 and v2 platforms. Euler is betting that what will make their protocol stand out is building products with safety and risk management practices used in traditional finance.
Both Aave and Compound use a static linear interest rate model, which Neal says doesn't respond to natural market forces: “That actually worked for the v1 and v2 stage of DeFi. Reactive rates are a lot more akin to the natural market rates you see in money markets or bond market.” Reactive rates are a new feature to Euler that hasn't yet been activated.
Further, the liquidation mechanism on Euler Finance uses a Dutch auction method which he says are “extremely efficient price discovery tools which are used in the Fed and Treasury all the time.” Euler’s white paper explains a number of other significant risk management they have introduced, including asset tiers, protected collateral, decentralized price oracles, risk adjusted borrowing capacity, and deferred liquidity, to name a few.
For TradFi institutions to adopt DeFi, Neal said it was important to Euler to prove that their protocol has been “battle-tested.” Before they could launch a mass marketing campaign and release more products like their upcoming Euler.Swap app, the lending protocol “had to live for a few years.”
In closing, the Euler Labs COO is happy with they have achieved so far while maintaining a modest public profile. The team prefers that Euler be viewed as a serious company building well-thought-out products.
Sponsored
Buy Crypto with a bank transfer, credit or debit card, P2P exchange, and more. Not investment advice. All trading risk. Terms apply.
Sponsored
Buy Crypto with a bank transfer, credit or debit card, P2P exchange, and more. Not investment advice. All trading risk. Terms apply.
Sponsored
Buy Crypto with a bank transfer, credit or debit card, P2P exchange, and more. Not investment advice. All trading risk. Terms apply.
Sponsored
Buy Crypto with a bank transfer, credit or debit card, P2P exchange, and more. Not investment advice. All trading risk. Terms apply.