What is Silo Finance?
Secure money markets for all crypto assets.
Silo Finance creates permissionless and risk-isolated lending markets.
To appreciate what this means, lets breakdown each of the key phrases:

Lending Markets

Lending markets allows users to lend and borrow assets. In traditional finance, this role is typically played by a bank. In decentralized finance (DeFi), protocols such as Silo allow users to fill this role themselves without relying on a centralized entity.

Permissionless

Users that want to create a lending market for a token asset do not need approval. Any token can be used on Silo without being whitelisted.

Isolated Risk

Lenders deposit funds into an isolated lending market consisting of Token ABC and the bridge asset only. If Token XYZ experiences an exploit, Token ABC lenders will not be affected since risk is isolated to the Token XYZ market.
Decentralized lending markets are not a new concept, with Aave and Compound pioneering the lending space. Silo aims to become the leading lending protocol by building upon the core drawbacks of the earlier protocols.

Why Silo

Shared Pools e.g. Aave/Compound/Rari Fuse

Shared-pool lending protocols like Aave and Compound create a single pool lending market for all token assets. In their implementation, Aave gathers all token asset deposits in the single pool where only a small set of token assets are whitelisted to be used as collateral to borrow any other token asset within this pool.
In the event of an exploit in collateral token or their price oracle, attackers can steal any token asset since they are all deposited into the same pool. Given the risk collateral tokens pose to the entire protocol, shared-pool lending protocols restrict collateral tokens to a handful of assets and therefore cannot scale to accept long-tail assets.
If your token is not whitelisted as collateral, you have no choice but to look at other lending markets.

Silo

Silo uses an isolated-pool approach where every token asset has its own lending market and is paired against the bridge asset (ETH) only. Lenders in all protocols are only exposed to the risk of ETH.
In addition, since all tokens are paired with ETH, there is only a single market for every token asset which prevents fractured liquidity and allows greater protocol efficiency. This is as opposed to pure lending pair approaches where a new lending market is created for each additional pairing.
Last modified 12d ago