Euler co-founder reflects on $195m hack and how DeFi protocols are becoming more robust

Episode 22 of Season 6 of The Scoop was recorded with The Block's Frank Chaparro and Euler Labs Co-Founder & CEO Michael Bentley

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Michael Bentley, co-founder and CEO of Euler Labs, joins The Block's Frank Chaparro on The Scoop to revisit one of DeFi's most significant security incidents and explain how his team rebuilt in its aftermath. In March 2023, Euler Finance, the lending protocol Bentley co-founded, suffered a flash-loan exploit that drained roughly $195 million in assets, at the time one of the largest hacks in decentralized finance history, stemming from a vulnerability in the protocol's donation and liquidation logic.

Bentley walks through what it took to respond in the immediate aftermath, including the negotiation process that eventually led the attacker to return the vast majority of the stolen funds, and the work of coordinating with security researchers, other protocols, and affected users during the crisis. He then turns to the longer rebuilding process, describing how the team used the following year to redesign Euler from the ground up rather than simply patching the original codebase, resulting in Euler V2, a modular and composable lending platform built to let developers create customized, isolated lending pools with more granular risk controls than the original protocol offered.

The conversation covers the extensive audit process behind the relaunch, with the protocol undergoing dozens of independent security reviews before going live again, as well as broader lessons Bentley believes the DeFi sector should take from Euler's experience, including the importance of modular risk isolation so that a single exploit cannot cascade across an entire protocol's deposits. Bentley and Chaparro also discuss how the wider DeFi ecosystem has matured its approach to security since 2023, with more protocols investing in formal verification, bug bounties, and incident-response planning as hacks and exploits remain a persistent risk for on-chain finance.

The episode offers a candid look at how one of DeFi's most damaging hacks became a catalyst for a more resilient, second-generation lending protocol, and at the operational discipline required to rebuild user trust and liquidity after a nine-figure loss shook confidence across the DeFi lending sector.

Euler V2 is a modular and composable lending platform that allows users to create flexible and secure lending pools.