The Euler Vault Kit is a system for constructing credit vaults. Credit vaults are ERC-4626 vaults with added borrowing functionality. Unlike typical ERC-4626 vaults which earn yield by actively investing deposited funds, credit vaults are passive lending pools. See the whitepaper for more details.

Users can borrow from a credit vault as long as they have sufficient collateral deposited in other credit vaults. The liability vault (the one that was borrowed from) decides which credit vaults are acceptable as collateral. Interest is charged to borrowers by continuously increasing the amount of their outstanding liability and this interest results in yield for the depositors.

Vaults are integrated with the Ethereum Vault Connector contract (EVC), which keeps track of the vaults used as collateral by each account. In the event a liquidation is necessary, the EVC allows a liability vault to withdraw collateral on a user's behalf.