Difference between revisions of "Silo Finance"

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Silo Finance creates permissionless and risk-isolated lending markets.
Silo Finance is a decentralized, risk-isolated and permissionless lending market, allowing users to create borrow-lend markets (known as "silos") for any token asset.


=== Features ===
Silo was developed as an innovation on pre-existing lending markets such as Aave and Compound that utilized a shared-pool model where whitelisted collateral can borrow any other token. Whilst this allows for high capital efficiency, an exploit in a single whitelisted collateral exposes all other tokens in shared-pool lending markets to risk of bad debt.


==== Lending Markets ====
In Silo, all token assets (or 'base tokens') receive their own isolated lending market consisting of the base token and the bridge asset(s) only. Since base tokens can only be used to borrow the bridge asset(s), an exploit in a base token will only affect bridge asset lenders in that specific silo. The bridge asset acts as an intermediary to allow for cross-silo borrowing.


* 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.
=== Features ===
 
==== Permissionless ====
 
* Any token asset can have a silo. Users and projects alike can propose markets for token holders to vote on.
 
==== 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.
==== Money Market ("silos") ====
* 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.
The core function of Silo is to allow for money markets for all token assets. Specifically, it allows for the creation of silos that allow DeFi users to lend, borrow, and collateralize their tokens. The primary value proposition of using Silo compared to other lending markets is risk-isolation, whereby the impact of an exploit in one token is confined to that token's silo rather than spreading to other tokens within the protocol. Since the introduction of money markets for new token assets does not introduce systemic risk to Silo, roll-out of new markets will not require governance approval in the future.  


=== Shares Tokens (sTokens) ===
===== Stablecoin =====
When you deposit a token asset into a silo, your deposit is represented by an ERC-20 token asset known as Shares Tokens or sToken for short. sTokens are your claim on the your deposited funds are minted on deposit and burned on withdrawal.  
Silo also allows the minting of XAI, the protocol's native stablecoin. XAI is one of two bridge assets alongside ETH that can be deposited, borrowed from, and used as collateral in any token silo.


There are 2 different deposits you can make and hence '''2 possible sTokens''':
XAI is an overcollateralized stablecoin similar to DAI and MIM and currently can only be minted using ETH or USDC as collateral. The amount of XAI available to mint from the ETH and USDC silos are known as 'credit lines' with the minting of XAI accruing interest to the SiloDAO. As AMM liquidity for XAI grows, SiloDAO intends to extend credit lines to additional silos, allowing more token assets to leverage their positions for greater capital efficiency.


* '''Borrowable Deposit:''' A deposit that can be borrowed by other users.  
===== '''Governance''' =====
* '''Protected Deposit''': A deposit that cannot be borrowed by other users.
Silo is a fully decentralized protocol, with governance decisions controlled by $SILO holders. Proposals that can be voted on include the creation of additional silos, upgrading of oracles, and in future the extension of credit lines. At present, the tokenomics model of $SILO is unclear but the team has discussed exploring a veSILO model.


== Sources: ==
== Sources: ==

Revision as of 05:42, 25 November 2022

Silo Finance is a decentralized, risk-isolated and permissionless lending market, allowing users to create borrow-lend markets (known as "silos") for any token asset.

Silo was developed as an innovation on pre-existing lending markets such as Aave and Compound that utilized a shared-pool model where whitelisted collateral can borrow any other token. Whilst this allows for high capital efficiency, an exploit in a single whitelisted collateral exposes all other tokens in shared-pool lending markets to risk of bad debt.

In Silo, all token assets (or 'base tokens') receive their own isolated lending market consisting of the base token and the bridge asset(s) only. Since base tokens can only be used to borrow the bridge asset(s), an exploit in a base token will only affect bridge asset lenders in that specific silo. The bridge asset acts as an intermediary to allow for cross-silo borrowing.

Features

Money Market ("silos")

The core function of Silo is to allow for money markets for all token assets. Specifically, it allows for the creation of silos that allow DeFi users to lend, borrow, and collateralize their tokens. The primary value proposition of using Silo compared to other lending markets is risk-isolation, whereby the impact of an exploit in one token is confined to that token's silo rather than spreading to other tokens within the protocol. Since the introduction of money markets for new token assets does not introduce systemic risk to Silo, roll-out of new markets will not require governance approval in the future.

Stablecoin

Silo also allows the minting of XAI, the protocol's native stablecoin. XAI is one of two bridge assets alongside ETH that can be deposited, borrowed from, and used as collateral in any token silo.

XAI is an overcollateralized stablecoin similar to DAI and MIM and currently can only be minted using ETH or USDC as collateral. The amount of XAI available to mint from the ETH and USDC silos are known as 'credit lines' with the minting of XAI accruing interest to the SiloDAO. As AMM liquidity for XAI grows, SiloDAO intends to extend credit lines to additional silos, allowing more token assets to leverage their positions for greater capital efficiency.

Governance

Silo is a fully decentralized protocol, with governance decisions controlled by $SILO holders. Proposals that can be voted on include the creation of additional silos, upgrading of oracles, and in future the extension of credit lines. At present, the tokenomics model of $SILO is unclear but the team has discussed exploring a veSILO model.

Sources: