Euler Finance Reports Over 51% TVL Growth in Q3 2025, Exceeding $2 Billion in Borrows Amidst Institutional DeFi Push

Executive Summary

Euler Finance, a decentralized lending protocol, demonstrated robust performance and strategic advancements in the third quarter of 2025. The protocol's Total Value Locked (TVL) expanded by over 51%, surpassing the $2 billion mark and securing its position among the top 10 largest lending protocols. This growth was accompanied by total deposits exceeding $4.18 billion and cumulative borrows reaching over $2 billion, with $871 million on Ethereum alone.

The Event in Detail

Q3 2025 marked a period of rapid expansion and product innovation for Euler Finance. The protocol launched Euler Frontier, Euler Swap, and Euler Earn, with the latter accumulating over $620 million in TVL within one month of its introduction. Multichain expansion was a key focus, with Plasma rapidly becoming Euler's second-largest market. A new Arbitrum Yield Market attracted $50 million in deposits within 37 days, further diversifying the protocol's reach. Additionally, Euler expanded to Base, Linea, and Avalanche, contributing to a 575% TVL surge to $671 million on these new chains.

A significant development in Q3 was the launch of the Sentora RLUSD Market, backed by Ripple's RLUSD stablecoin and U.S. Treasury bills. This market exceeded $225 million in deposits within days, underscoring successful Real-World Asset (RWA) integration and strong institutional interest. The re-emergence of Euler V2 followed 31 comprehensive security audits and meticulous development after a 2023 flash loan attack, positioning it as a "meta-lending protocol" designed for highly customizable borrowing and lending vaults through the Euler Vault Kit (EVK) and Ethereum Vault Connector (EVC).

Financial Mechanics

Euler Finance transitioned to economic consolidation in Q3 2025, with protocol fees more than doubling to $26 million. This growth signifies increased revenue generation and a strengthening of the protocol's internal economy, which is expected to be further enhanced by a unified fee model. The protocol also plans to introduce a synthetic USD currency within weeks, aiming to retain value within its ecosystem and enhance utility for EUL token holders. This proprietary stablecoin could reduce reliance on external stablecoins like USDC and potentially boost EUL utility through fee auctions or governance.

Business Strategy & Market Positioning

Euler V2's modular design allows developers to build customizable borrowing and lending vaults, facilitating diverse markets such as Resolv (for trading USR), Euler Yield (for looping stablecoins), and Apostro BTC (for leveraged BTC staking). This modularity, combined with the ability for vaults to recognize deposits in existing vaults as collateral, aims to address fragmentation and capital inefficiency in isolated lending markets. Strategic partnerships include collaboration with Gauntlet for risk management of Euler Prime, Euler's flagship lending market for blue-chip DeFi assets and RWAs. Projects like Usual's Stability Loan (USL) are leveraging the Euler Vault Kit for fixed-rate borrowing, accumulating over $170 million in deposits within three weeks.

Michael Bentley, CEO of Euler Labs, emphasized the protocol's focus on institutional adoption, regulatory normalization, and the rise of tokenization/RWAs. He envisions Euler as a foundational liquidity layer for traditional finance.

"DeFi adoption on Euler surged from zero to $3 billion in just nine months," Bentley stated, citing examples such as BlackRock and Apollo tokenizing money market funds on-chain and using these assets as collateral on Euler. He further noted, "The industry is on the cusp of moving all of finance on chain."

Broader Market Implications

Euler Finance's strategic advancements align with and contribute to the broader trends of institutional DeFi adoption and RWA tokenization. The total market size for tokenized real-world assets crossed $30 billion in Q3 2025, a ten-fold increase from 2022 levels, driven by institutional demand for on-chain fixed income and private credit. U.S. Treasuries, representing approximately $7.3 billion of this total, remain a foundational asset class. Euler's integration of RWAs, such as the Sentora RLUSD Market, positions it as a key infrastructure provider for this evolving landscape.

Michael Bentley predicts "explosive growth" if a fraction of traditional finance moves on-chain, suggesting a potential "10x growth in the amount of TVL, or total deposits in DeFi within a few years." This indicates that Euler's focus on creating composable, efficient, and transparent DeFi rails could catalyze significant shifts in investor sentiment and corporate adoption across the Web3 ecosystem and traditional finance.

Expert Commentary

CEO Michael Bentley highlighted several factors driving the future of on-chain finance, including growing institutional adoption and regulatory normalization, referencing legislation like the 'Genius Act' in the US and 'Micer' in the EU. He also pointed to the explosive growth in stablecoin adoption, with many stablecoins flowing into DeFi for yield opportunities. Bentley articulated his vision for Euler as a foundational liquidity layer, stating that traditional fintechs are beginning to utilize DeFi rails as back-end infrastructure. He emphasized that the shift from crypto as a retail phenomenon to an institutional one is driven by interest awaiting positive regulatory movements, positioning DeFi as a superior infrastructure compared to traditional finance due to its composability, efficiency, and transparency.