If there is one part of the blockchain industry that has been disruptive, it is the crypto lending industry in the DeFi space.
Historically, loans have been very centralized and under the control of banks with often stringent conditions. With crypto lending in the DeFi space, this is circumvented as people can access loans using a combination of smart contracts and cryptocurrency while maintaining their privacy.
However, this system is far from perfect, as malicious parties have attempted to exploit smart contracts and attack liquidity pools of even the largest DeFi platforms. In the case of the latter, some lending protocols have gotten into the habit of segregating cryptocurrency pools to minimize possible damage from these attacks. Yet these efforts have not entirely contained the problem.
This is because they either only separate cryptocurrency into pools based on trading pairs or create multiple smaller pools of different cryptocurrencies. However, a new protocol, Silo Protocol, has devised a way to reduce the effects of any potential attack on the barest mining.
How the Silo protocol works
Silo is a non-custodial lending protocol that allows isolated money markets made up of just two assets. The assets in question are the token itself and ETH, which act as a gateway token between different money markets. With Silo, users can create a money market against any asset.
The fact that each asset has its own isolated money market independent of the other means that the risks attached to any asset are contained in a single market. The potential of Silo Protocol has been clearly seen by the industry as it won the ETHGlobal 2021 hackathon.
Now, the management of Silo Protocol has laid out plans to expand its operations, primarily with an upcoming token sale.
The Gnosis sale
Silo Protocol held its Gnosis auction this month, where interested parties were able to purchase 10% of Silo’s token supply that was intended for sale.
The primary reason for the sale is to provide liquidity for Silo’s Decentralized Autonomous Organization (DAO), and the funds raised will be distributed for two purposes. 85% of it will be put in the DAO’s treasury, and its future use will be voted on by the community. The remaining will be used as a development fund.
The reason Gnosis was used as the platform of choice for the sale was due to its pricing mechanisms. With Gnosis, robots cannot buy tokens, and a clearing price mechanism is used for all tokens for sale.
The Silo team has also reaffirmed their commitment to making sure that the ecosystem is as community-focused as possible, even during fundraising processes.
“Unlike the 2017 ICOs, where the funds raised went to the company developing the protocol; The Protocol Owned Liquidity raised by Silo is still under the control of the community. The community can therefore direct it to achieve sustainable growth of the protocol.
Strong DAOs establish a culture of togetherness, fairness, and transparency, and we think auctioning off tokens on Gnosis Auction where the entire community establishes a fair value for the project is the first step to build such a culture; for Silo DAO,” said Aiham Jaabari, a founding contributor to the Silo.
