Contract for Services with Euler Labs

Author(s): Euler Labs Submission Date: 07 Mar '24

Abstract

The proposal requests a new contract for services for Euler Labs with an effective start date of 1 April 2024. Protocol security is a critical part of the services related to the proposal and represents the largest relative and absolute increase by comparison to the soon-to-expire previous contract.

Background

The current contract for services with Euler Labs Ltd. was entered into in May 2022 by the Euler Foundation, preceding the creation of the DAO. The contract covers research and development-related matters. Under the current contract, the Euler Foundation agreed to pay Euler Labs an estimated $5.7m USDC per year, for two years. Apart from complications arising from the events in 1Q2023, Euler Labs had been invoicing the Euler Foundation for its services on a calendar quarterly basis. The most recent invoice issued by Euler Labs was for 4Q2023.

Current Contract Details

Below is a summary of the key aspects of the current contract:

• Commenced 1 May 2022.
• The contract term is 2 years.
• The contract allows Euler Labs to invoice the Euler Foundation an estimated $5.7m USDC per year (inclusive of all audit and other third-party vendor costs).

Motivation

Since Q2 2023 (post-protocol exploit), the Euler Foundation has engaged Euler Labs to contribute to the development of a suite of software products that were not expressly contemplated in the contract for services entered into in May 2022.

Euler Labs would like to enter into a new contract for services with the Euler Foundation that more accurately reflects the scope of technical and administrative services provided by Euler Labs to the Euler Foundation. Below is a list of the protocols for which Euler Labs has provided services as a contributor under the existing contract:

• Euler protocol (v2) - Consisting of the recently announced Euler Vault Kit (EVK), which abstracts and modularises the properties of a lending protocol to enable v2 to offer greater flexibility and security for users than v1.
• Euler Vault Connecter (EVC) - A communications protocol mediating cross-talk between vaults, enabling their use as collateral for one another.
• Euler Governance Platform (EGP) - A revamped governance page integrated with Snapshot and Tally enabling users to vote on both on-chain and off-chain governance proposals.
• Euler Swap - A modular decentralised exchange designed to integrate with Euler v2.
• Euler Synthetics - A development kit for deploying synthetic assets on top of Euler v2.
• FeeFlow - A decentralised auction mechanism allowing Euler DAO to convert any fees it receives on any platform into an underlying asset of its choosing.
• RewardStreams - A protocol for projects to reward markets on Euler v2 or EulerSwap in a decentralised manner and allow users to receive rewards without having to stake LP tokens.

Euler Labs expects to continue to serve as a contributor under the new contract for these Euler ecosystem components.

Euler Labs grew its personnel related to this engagement to 25 in order to provide to the Euler Foundation the services that it requested under the current contract. Euler Labs believes that it is important for Euler Labs team members to be aligned and incentivised as contributors to the Euler ecosystem. To this end, Euler Labs is requesting, on behalf of current and future contributors, that the Euler Foundation agree, under the new contract, to make a one-off token grant of 1.6m EUL tokens to be allocated to for this purpose.

To date, 5.4m EUL tokens (or 20.5%) have been made available to Euler Labs’ contributors. An additional 1.6m would bring the total to roughly 7.0m or approx 26.4% of total supply. This would bring Euler in line with related projects Compound (26.2%); Aave (25.0%); Morpho (29.0%); Silo (28.5%). If approved, the tokens will be moved from the DAO’s main treasury wallet to its EUL allocation wallet.

As the community is aware, the Euler Protocol is expected to relaunch in 2Q2024, subject to audit completion. The announcements to date relating to the re-launch of the Euler Protocol, and associated components include:

• EVC announcement
• Euler Governance Platform announcement
• Euler protocol (v2) announcement

Specification

If this proposal passes, the Euler Foundation will enter into a new contract for services with Euler Labs based on the scope of services outlined below. The remaining one months of the old contract entered into on 1 May 2022 will be cancelled. The effective start date of the new contract will be 1 April 2024.

New Contract Details

Below is a summary of the key aspects of the new contract:

• Dated from 1 April 2024 (2Q2024).
• The term of the new contract will be one (1) year.
• The contract will be reviewed and considered by the DAO annually hereafter.
• The total value of the contract is estimated to be $11.8m USDC.
  • The proposal is based on a carefully prepared forecast. Euler Labs Limited maintains its books and records in GBP, in accordance with UK GAAP and the Companies Act.
  • $4.1m of which is directly attributable to security-related services, which are expected to be performed by leading security firms such as Certora, Spearbit, Open Zeppelin, Chain Security, Trail of Bits, yAudit, Omniscia, and others.
• One-off token grant of 1.6m EUL to be made available to Euler Labs for allocation to contributors.