There’s no denying that the decentralized finance (DeFi) market has revolutionized how people interact with the global economy. This is best exhibited by the fact that the revenue generated from today’s most prominent DeFi protocols rose from $5.4 billion to a whopping $17.7 billion between 2022 and 2023 — thus showcasing a growth of over 220%.

Within this burgeoning landscape, Silo Finance has emerged as a one-of-a-kind DeFi lending platform, allowing crypto enthusiasts to seamlessly transition to the world of crypto-centric finance. As things stand, the protocol boasts of a total locked value (TVL) of $323.9 million. Lastly, the total volume of funds borrowed from the Silo ecosystem to date stands at $91.2 million.

This article delves into the intricacies of Silo, allowing readers to gain a better understanding of the ecosystem. So, without any further ado, let’s jump straight into the heart of the matter.

What is Silo Finance, and How Does it Work?

Silo Finance is a non-custodial lending protocol, which means that at no point does it take over custody of its user’s funds. Additionally, the platform enables the creation of permissionless money markets, accommodating a vast array of crypto assets. This inclusivity and flexibility are the key drivers of all its underlying operations.

Lending Markets

The concept of lending markets lies at the heart of Silo Finance, allowing users to borrow or lend their crypto much in the same way as traditional financial institutions like banks. However, Silo Finance democratizes this process by removing the need for a central authority, thereby enhancing accessibility and introducing a novel level of user autonomy and security.

Permissionless System

Silo Finance's digital framework is 'permissionless,' meaning that any user or participating project can propose the creation of a new lending market (association with a specific token). Once proposed, these markets are subject to community voting, something that lies in stark opposition to most traditional financial (TradFi) systems and even some DeFi platforms — where such decisions are typically made by a centralized governing body or a small group of decision-makers.

Isolated Risk

A distinctive feature of Silo Finance is its approach to risk management. The platform employs an isolated risk model, where lenders deposit funds into specific markets, each tailored to individual token pairs. For example, a lending market might consist exclusively of Token X and a bridge asset. This isolation is a strategic move to contain risks such that in the event of a security exploit or market failure, only one token and its associated market are impacted.

This setup protects lenders from cross-market risks and is also a significant departure from shared-pool lending protocols, where an exploit in one part of the pool can potentially compromise the entire system.

What Makes Silo Unique?

By concentrating liquidity in individual pools, Silo Finance ensures that each market operates at an optimum level, free from the dilution of resources common in shared pools. This focused approach not only improves transactional efficiency but also enhances a user’s overall experience.

Moreover, Silo's digital architecture boasts remarkable scalability, accommodating a wide array of tokens — theoretically up to around 10,000 at present. This scalability ensures that the platform is able to continuously expand its offerings, adapting to the evolving demands of the crypto market and its diverse range of cryptocurrencies.

This unique blend of isolated risk management alongside an efficient market structure has helped place Silo Finance at the forefront of the DeFi lending sector, offering a secure, efficient, and scalable platform for crypto enthusiasts and investors.

Silo Team, Partners, Audits

The team behind Silo consists of a dynamic group of twelve full-time professionals, including smart contract and blockchain engineers. Moreover, the protocol has undergone several audits, including a thorough smart contract examination by ABDK. The firm has also obtained a security assessment certificate from Quantstamp and a formal verification by Certora. Lastly, Silo also has an active bug bounty program which is overseen by ImmuneFi, Web3's leading bug bounty platform that currently produces $60+ billion in user funds.

Conclusion

As highlighted above, Silo Finance stands out within the DeFi arena thanks to its innovative approach to lending and borrowing. Its isolated risk model and permissionless system position it as a secure and scalable solution that can help new market entrants harness the power of DeFi in the easiest manner possible. Notably, Silo has partnered with Rivo, a DeFi platform that combines a smart-contract wallet with a DeFi marketplace, unlocking seamless, non-custodial access to cross-chain yield opportunities. As a result, its USDC.e vault is accessible on the Rivo DeFi marketplace, providing users with an easy and secure way to generate yield.