Silo Finance is a money markets protocol that introduces a new design model to isolate risks while retaining capital
Disclosure: Members of Nansen may be participating in the following launch auction. This statement discloses any conflict of interest and is not a recommendation to purchase any token or participate in the mentioned auction. This content is for informational purposes only and is not investment advice. Please exercise caution if you are participating in this auction launch.
TLDR; Silo Finance is a money markets protocol that introduces a new design model to isolate risks while retaining capital efficiency. They are able to do this through some of their flagship features such as an isolated two-asset "Silos" for each market on the platform and using a dynamic interest rate to better handle utilization of a given market. Their isolated markets design would ensure scalability in the number of markets they can support, without introducing long tail risks to the entire ecosystem. They will be using Protocol Owned Liquidity (POL) to seed liquidity in the Silos and give more ownership to the community. Silo Finance originated from ETHGlobal 2021 hackathon in September and built Silo Finance from the ground up (not a fork). The project is backed by some notable seed investors and the Genesis Token Auction will be held from Dec 6 to Dec 9 2021.
Silo Finance creates secure and efficient money markets for all token assets through a permissionless, risk-isolating lending protocol. The design was made to combat the risks associated with shared-pool lending protocols such as Cream and Aave where the protocol’s credit-worthiness is directly exposed to the lending services of riskier long-tail assets. By default, shared-pool designs are exposed to the risks of every asset in the pool, leading to limited markets (Aave or Compound) or more risky pools where the risk is bundled in N number of assets (see Rari). In short, the shared-pool model makes a tradeoff for the support of longer tailed assets and the overall safety of deposits.
Silo Finance seeks to achieve secure, efficient, and permissionless money markets by:
Silo Finance will initially need to attract a large amount of liquidity to incentivize users and achieve sustainable growth of the protocol. Rather than rent out the liquidity through traditional liquidity mining programs, Silo Finance will be established as a market maker through Protocol Owned Liquidity and attract lenders and borrowers of all collateral asset types, inclusive of riskier long-tail assetsPOL ensures the protocol achieves fast growth, retains controls and flexibility, and lessens market volatility during the early days after protocol launch.
Silo Finance is not a generic fork of another lending/borrowing protocol but was built on an entirely new design framework. The decision to build out the protocol from the ground up mitigates significant security risks and enables the protocol to make better design choices. This statement does not intend to put down generic forks, but they often oversimplify deeply complicated systems and don't lead to any meaningful innovations. Silo Finance is a fundamentally new approach to mitigating risk and creating scalable money markets. Given they are dealing with completely new smart contracts and risk parameters, the team has committed to one security audit with Quantstamp and a community review with C4. Both security audits will take place in January 2022.
Silo Protocol will offer 10% of its total token supply to the community through a public batch auction conducted on the Gnosis Auction platform. For the first 6 months, almost 100% of Silo’s circulating supply will come from the genesis event. Over the next 4 years, 1B $SILO tokens will be minted.
Genesis Protocol-Owned Liquidity (10%)
Community Treasury (45%)
Early Contributors (6.75%)
Founding Contributors (21.75%)
Early Community Rewards (0.2%)
Early Investors & Early Advisors (6.30%)
Future Contributors & Future Advisors (10%)
Genesis Token Auction will be held from 3:00 PM UTC, December 6, 2021 to 3:00 PM UTC, December 9, 2021.
Whitelist is open for duration of Auction: whitelist.silo.finance
$SILO Token Address:
$SILO Token God Mode:
The token batch auction allocates tokens starting with bidders with the highest bids down until all 100M $SILO tokens are assigned to bids.
Here is how bids are filled and clearing price is calculated:
It will be well positioned for having stablecoins of all risk types to build out liquidity with isolated risks for the depositors. Seems like it can be the natural home for stablecoins of all different risk preferences. Silo’s isolated pools framework removes the issue of bringing down credit worthiness of the entire protocol when long-tail assets are added. For example, $MIM and $RAI have different methods of backing. Although $MIM may be less backed, Silo is built to support the user’s risk appetite without putting other assets at risk and without sacrificing scalability. In short, it enables opportunities for long-tail asset pools and enhances the ability of creating permissionless money markets for any risk asset.
Through its 2-asset styled pools and bridging asset mechanism, Silo allows for deeper pools that reduces fragmentation of liquidity (as seen w/ Kashi). Note, they have not exclusively specified what they will be using as their bridge asset.
Currently, the $SILO token is just a governance token and does not have any explicit utility within the protocol. It will be used for Silo DAO governance for proposals that include influencing pool parameters, movement of DAO-owned liquidity, and other decisions. There are no further utility/incentives built into the $SILO token (at the time of writing), and the community will decide on the token design.
The bridging asset is not currently defined, but the whitepaper currently points towards $ETH as a bridging asset. The choice of bridging asset may have influence over the successful execution of the protocol.
Given the lack of attention towards the auction, there’s an increased possibility of a low distribution amongst token recipients. This may result in a high concentration of $SILO holdings by a few players resulting in more centralized decision making regarding governance of the DAO.
The valuation of the seed round is undisclosed and Silo Finance has no VC backers as of now. There are no clear benchmarks to price a bid for the auction so we are unsure of what a “fair price” is or what may be a good entry.
Overall, there are some risk factors to consider. Once these have been evaluated, it’ll be interesting to keep track of the project given a number of reasons: