Summary
Silo Finance is a non-custodial lending protocol built around risk-isolated money markets ("silos") and an ERC-4626 Managed Vault layer on top. In isolated markets, each market is strictly scoped (two assets per market), so collateral and borrow risk are contained to that market.
Managed Vaults, by contrast, are single-asset deposit vaults that allocate liquidity across multiple Silo markets (and, subject to configuration, other ERC-4626 destinations) to optimise APY without you micro-managing positions. Vault deposits earn yield but cannot be used as collateral to borrow; if you want to borrow, you interact with isolated markets directly.
Silo is live on Ethereum, Sonic, Arbitrum, and Avalanche.
For Users
If you need borrow/lend with collateral control and ring-fenced risk → use Isolated Markets.
If you want single-asset, "hands-off" yield routed by a professional manager across markets → use Managed Vaults.
What Silo Is (and why it's different)
Silo flips the classic "shared pool" lending model on its head. Instead of one giant pool per chain, each Silo market is a two-asset pair (e.g., Base Asset + Bridge Asset). You can lend either asset and borrow the other, with risk strictly confined to that market. Systemic spillover from one asset to the entire protocol is materially reduced because there's no giant, shared collateral basket.
Architectural Innovation
Architecturally, Silo runs a standard peer-to-pool, over-collateralised model (you deposit, set collateral, borrow below LTV; liquidations happen if health falls too low). But risk isolation is the core primitive: silos are independent, each with its own oracle, interest rate model, and liquidation parameters.
Silo's Managed Vaults layer is ERC-4626-compliant. Any third-party manager can deploy a vault, define a whitelist of markets, and allocate deposits across those markets. This makes "deposit once, get diversified Silo exposure" possible — with the trade-off that vault deposits don't power your borrowing.
Networks: Ethereum, Sonic, Arbitrum, Avalanche.
Isolated Markets (a.k.a. "Silos")
What you can do:
- ✓Supply either asset in the silo to earn interest (and any incentives).
- ✓Enable as collateral and borrow the other asset.
- ✓Repay and withdraw anytime, subject to solvency and liquidity.
How risk isolation works
Each market has exactly two assets. Your collateral, borrow, interest accrual, and liquidation risk are scoped to that pair and its oracle(s). A toxic asset listed in one market cannot contaminate unrelated markets. This is the main design distinction versus large, shared-pool designs.
Key Features
Interest Rates & Utilisation
Silo uses a dynamic interest rate model configured per market/asset to target an optimal utilisation range (often implemented via a PI-controller style curve). That means borrow rates respond non-linearly as utilisation climbs, helping balance liquidity.
Oracles
Oracle adapters are market-level and oracle-agnostic (Chainlink, RedStone, Pyth, DIA, ERC-4626 NAV feeds, etc.). Managers/market deployers choose feeds; this is powerful, but it also means oracle due diligence is part of market due diligence.
Liquidations
When health factor hits 0%, positions can be liquidated by external liquidators (the protocol doesn't liquidate you itself). Liquidators repay debt, seize and sell collateral, and keep a fee.
Managed Vaults (ERC-4626)
What they are
Single-asset deposit vaults that allocate your deposits across whitelisted Silo markets. A third-party vault manager sets policy, rebalances across markets, and charges a performance fee. The goal: deliver optimised, diversified yield while inheriting market-level risk isolation from the underlying silos.
Two big differences vs. Isolated Markets:
- • Deposits can't be used as collateral for borrowing. If you want leverage or borrow stablecoins, you go to the silo directly.
- • Manager discretion: you're trusting a smart-contracted mandate plus the manager's allocation logic. You should evaluate the manager's track record, mandate, and risk controls.
Who creates vaults?
They're permissionless to deploy. Notable managers in the broader EVM ecosystem include Steakhouse Financial, known for institutional-grade vault curation and RWA work; they actively curate lending vaults (e.g., on Morpho) and specialise in stablecoin/RWA strategies. You'll also see community managers proposing Silo vaults via governance. Evaluate each manager's mandate, whitelist, fee schedule, and disclosures.
Note: Silo's documentation indicates vaults are ERC-4626 and can (subject to configuration) allocate to Silo v2 markets and other ERC-4626 destinations. Always read the specific vault docs/whitelist.
Head-to-Head: Isolated Markets vs. Managed Vaults
| Dimension | Isolated Markets (Silos) | Managed Vaults |
|---|---|---|
| Primary use | Borrow/lend with collateral; strategy control. | Single-asset deposit for optimised, manager-run yield. |
| Risk model | Risk confined to the two-asset market you use; oracle/IRM set per market. | Inherits market isolation, but adds manager + allocation risk across multiple markets. |
| Complexity | Higher: you manage collateral, LTV, liquidation risk. | Lower: "deposit & let the manager allocate." |
| Borrowing | Yes (over-collateralised). | No — deposits aren't borrowing collateral. |
| Targets | Power-users, hedgers, structured strategies. | Yield seekers who want diversification without active management. |
| Fees | Protocol reserve factors; gas; any incentive dynamics. | Performance fee to manager + underlying market fees. |
| Due diligence | Market parameters, feed quality, liquidity depth. | As left plus: manager track, whitelist, mandate, rebalancing rules. |
How Silo Compares to Aave (V3)
Aave popularised the shared-pool model with robust risk tooling (caps, isolation mode, e-mode). Aave V3's Isolation Mode lists certain collaterals with strict borrow restrictions (often stablecoin-only) and debt ceilings to contain tail risk — but liquidity still resides in a large, multipurpose pool per market.
Key Differences
Silo differs in default granularity: every market is inherently isolated to two assets. There's no sprawling, shared collateral basket for that market; the blast radius of a bad asset is limited to the silo that lists it. Practically, that can reduce systemic contagion risk and allow long-tail assets to exist without endangering unrelated pairs.
Aave's e-mode and isolation give excellent capital efficiency for tightly correlated assets and controlled exposure to new listings — ideal for blue-chip stables and LSDs. Silo's approach maximises ring-fencing by design and then re-aggregates via Managed Vaults for depositors who want convenience.
Consider your goal: leverage and deep liquidity (Aave) vs. bespoke pair risk and vault-routed yield (Silo).
Step-by-Step: Two User Journeys
A) Using Isolated Markets
- 1Choose chain & market (e.g., ETH/USDC silo on Arbitrum). Verify oracle(s), reserve factors, and utilisation.
- 2Supply Asset A, enable as collateral (optional), and check your health factor.
- 3Borrow Asset B within LTV limits, leaving a safety buffer vs. liquidation.
- 4Manage: monitor rates, market utilisation, and your health.
- 5Repay & withdraw when done.
B) Using Managed Vaults
- 1Pick a vault matching your deposit asset (e.g., USDC Vault) and read the vault mandate: whitelist, target markets (stables/RWA focus), fees.
- 2Deposit your asset — you receive vault shares (ERC-4626).
- 3The manager allocates to whitelisted Silo markets (and potentially other ERC-4626 targets per the vault's policy).
- 4Claim/compound as per vault mechanics; withdraw any time (subject to liquidity).
- 5Track manager updates (governance/forum) and rate behaviour.
Assets & Markets (focus: Stables & RWA)
Silo supports market creators to list pairs across chains, with oracles chosen per market. For yield, stablecoin markets (USDC, etc.) and RWA-adjacent markets are typically the most intuitive entry point for conservative depositors, while traders might prefer volatile pairs for borrow opportunities.
When evaluating any stable/RWA market, verify:
- • Oracle provider & pricing methodology (e.g., Chainlink vs. RedStone; pull/push; smoothing).
- • Liquidity depth & utilisation (impacts withdrawal and rate spikes).
- • Interest rate curve and reserve factor (lender APY take).
Token & Governance (quick)
SILO is the governance token. xSILO is the staked/escrowed form that participates in revenue sharing. As of 1 Sep 2025, xSILO receives revenue in USDC, following a governance update. A separate governance decision (Aug 2025) approved distributing 50% of protocol revenue to xSILO holders in ETH/USDC; always check the latest forum posts for exact split and chains.
Governance occurs on the Silo forum and associated voting venues; it covers parameter changes, vault programmes, and revenue policy.
Security, Audits & Known Incidents
Audits/Formal methods
Recent reviews by Sigma Prime and Certora are documented in Silo's audits page. Always read the latest reports/notes for scope and findings.
June 25, 2025 incident
A pre-release leverage module (separate from core Silo markets) suffered a borrow-manipulation exploit via overly broad approvals (≈ $545k impact). According to Certora's write-up and multiple analyses, core markets and user funds were not at risk.
Lessons: minimise privileged approvals, segregate experimental modules, and monitor event streams.
Risk you still own (both tracks):
- • Oracle risk (bad feeds → wrong liquidations).
- • Interest rate volatility/liquidity risk at high utilisation.
- • Liquidation risk if your LTV goes too high (isolated markets).
- • Manager/mandate risk (vault track): fees, whitelist choices, rebalance cadence.
Important: Read the Silo risk pages and specific market/vault docs before depositing.
Practical Tips (actionable)
For yield hunters (no borrow)
Start with a Managed Vault in your deposit asset (e.g., USDC) curated by a reputable manager. Confirm the vault's whitelist emphasises stablecoin/RWA markets and check performance/fee disclosures. Then monitor utilisation and APY trends on-chain or via dashboards.
For strategy builders/borrowers
Use Isolated Markets. Keep a conservative safety buffer (liquidation bands can move fast under stress). If you're running basis or delta-neutral, model the interest curve sensitivity and potential oracle lags.
General Best Practices
- • Diversify oracle exposure: favour markets with mature oracle stacks (Chainlink/RedStone) and well-documented parameters.
- • Security hygiene: use hardware wallets, verify contract addresses from official docs, and prefer audited markets/vaults.
Silo vs. Aave at a Glance (for the "which one?" question)
Choose Silo Isolated Markets when:
You need pair-level risk ring-fencing or want to list/participate in idiosyncratic assets without touching a giant shared pool.
Choose Silo Managed Vaults when:
You want hands-off, single-asset yield with manager curation across multiple Silo markets.
Choose Aave V3 when:
You want deep shared liquidity, plus Isolation Mode/e-mode for capital-efficient borrowing in correlated asset classes (e.g., stables, LSDs) — accepting that it's still a shared pool with governance-enforced caps rather than pair-native isolation.
How to Get Started (fast)
Yield-first path:
- 1. Pick a chain (ETH / Arbitrum / Sonic / Avalanche).
- 2. Choose a USDC or stablecoin Managed Vault with a clear mandate (e.g., stable/RWA focus).
- 3. Deposit → monitor APY and manager updates.
Borrow-first path:
- 1. Pick your Isolated Market for the asset pair you care about.
- 2. Supply collateral, borrow within limits, maintain a safety buffer.
- 3. Repay/withdraw.
Frequently Asked Questions
Is a Managed Vault safer than lending directly in a silo?
Different risks. Vaults diversify across markets but add manager/mandate risk. Direct silo lending removes manager risk but concentrates you in one market. Evaluate which risk you prefer.
Can I borrow against a Managed Vault deposit?
No. Vault deposits aren't collateral. Borrowing requires interacting with isolated markets directly.
Which chains are supported today?
Ethereum, Sonic, Arbitrum, Avalanche (check app/docs for live status).
How are rates set?
Per-market dynamic interest rate models target an optimal utilisation; borrow demand drives lender APY.
What happened in the June 2025 incident?
A pre-release leverage module (separate from core) was exploited (~$545k). Core markets and user funds were not at risk, per Certora's report.
Ready to Explore Silo Finance?
Start earning competitive yields with Silo Finance's isolated lending markets or managed vaults. Compare rates and find the best opportunities for your portfolio.