Silo Finance pioneers isolated-market lending — each asset gets its own silo, and a bad listing can't cascade to affect other markets. Best for users who worry about correlated market risk in traditional pool-based lenders.
How Silo works
Instead of Aave's shared-pool design where all supplied assets can be borrowed by anyone, Silo creates an isolated market per collateral asset. If ARB collateral has a bad price event, only the ARB silo is affected — USDC, ETH, and other silos are unaffected.
Silo v2 introduced a modular design allowing even more granular risk configuration per silo.
Trade-offs
- Better isolation vs pool designs
- Trade-off: liquidity is fragmented across silos
- Best for risk-averse lenders who prioritize containment
Verdict
Silo's isolated-market model contains risk in ways Aave and Compound can't match. Best for lenders who worry about correlated market failures.