Silo Finance is on a mission to provide secure money markets for all crypto assets. At its core, Silo Finance creates permissionless and risk-isolated lending markets, and each of these elements plays a crucial role in redefining the DeFi lending landscape.
Lending Markets
Lending markets are the backbone of DeFi, enabling users to both lend and borrow assets. What sets Silo Finance apart is that it empowers users and projects to create lending markets for any token asset, without relying on a centralized intermediary. This permissionless approach fosters innovation and inclusivity in the DeFi ecosystem.
Permissionless
In the world of Silo Finance, the power lies with the community. Anyone holding a token can propose a market, allowing the entire ecosystem to decide which markets are valuable. This decentralized approach contrasts with traditional lending systems where centralized entities dictate the available options.
Isolated Risk
Security is paramount in DeFi, and Silo Finance takes it to the next level with its isolated risk model. When you deposit your assets into a Silo market, your risk is confined to that specific market. If another market experiences an exploit, your holdings remain unaffected, ensuring the safety of your assets.
Why Silo Finance?
To understand the significance of Silo Finance, let's compare it to shared-pool lending protocols like Aave and Compound.
Shared Pools (e.g., Aave/Compound/Rari Fuse)
Shared-pool lending protocols consolidate assets into a single pool, where only a select few token assets are whitelisted as collateral. In case of an exploit or price oracle manipulation in any token within the pool, all assets are at risk. These protocols are limited in their scalability and are unable to accommodate a wide range of assets.
Silo
Silo Finance employs an isolated-pool approach, where each token asset has its dedicated lending market paired with bridge assets like ETH or XAI. This unique approach ensures that risk exposure is limited to ETH and XAI, regardless of the assets involved in a particular market. With only one market for each token asset, Silo Finance prevents liquidity fragmentation and maximizes protocol efficiency.
How Silo Works
Understanding how Silo works is key to realizing its potential. Let's break down the process:
- Deposit Collateral: Users can deposit collateral in the form of any supported token asset. Each asset has its isolated lending market or "silo."
- Borrow Bridge Assets: By depositing collateral, users gain access to bridge assets like $ETH and $XAI on Ethereum or $ETH and $USDC on Arbitrum.
- Collateral Flexibility: Once bridge assets are obtained, users can deposit them into one or multiple silos, using them as collateral to borrow other tokens within the same silo.
- Risk Isolation: Importantly, each silo operates independently. If an exploit occurs in one silo, users in other silos remain secure. This is a stark contrast to shared-pool lending protocols, where the entire ecosystem is exposed to systemic risk.
As the Silo protocol grows, more markets will be added, expanding the range of tokens available as collateral and enabling cross-borrowing between silos.
Silo's Vision and Differentiation
Silo Finance aims to bring secure lend/borrow markets to all tokens, similar to how Uniswap brought liquidity pools to thousands of tokens. Users will be able to use any token as collateral, enhancing the DeFi ecosystem's inclusivity.
What sets Silo apart is its secure, efficient, and scalable approach. Risk is isolated to individual markets, ensuring that exploits in one market do not affect others. Efficiency is maintained through single-pool markets for each token asset. Silo's design enables a lending market for virtually any token.
Silo's Future and Deployment
Silo Finance is diligently preparing for security audits, which are set to occur in January 2022. Once completed, Silo will be rolled out to users. The Silo Finance team consists of seven dedicated members, each contributing their expertise to the project's growth. The team includes smart contract experts, operations leads, frontend developers, and more.
Silo Finance welcomes talented individuals to contribute to its growth. Whether through content creation, marketing, or community development, there are opportunities to be part of Silo's journey.
Silo Finance is chain-agnostic, meaning it can be deployed on Ethereum, EVM-compatible chains, L2 scalability chains, and beyond. The deployment location is yet to be finalized.
