[AIP-18] Allocate AURA Liquidity to Silo Finance

TL;DR

• Silo Finance requests a capital injection of $100,000 of AURA into the Silo Protocol - AURA market. The market is risk-isolated by design, ensuring depositors are not affected by contagion in other markets.
  • This liquidity can be removed at the behest of the Aura DAO at any time and would provide additional revenue to the Aura DAO.
• This integration would become the first on-chain lending pool for $AURA, greatly expanding the use case for the Aura token.
• Silo Finance has been an active ecosystem participant in Aura by providing voting incentives to auraBAL holders through Hidden Hand and is uniquely positioned to list this market due to Silo being one of, if not the only, lending protocol with a Balancer Oracle integration.
• Silo Finance’s smart contracts are fully verified by Certora and have undergone audits by Quantstamp and ABDK.

Background

Silo Finance is a non-custodial lending protocol that creates risk-isolating money markets. In our lending protocol, each market - we call it a silo - consists of a base asset such as $AURA and two bridge assets, ETH and a stablecoin XAI (pronounced /zī/ ). Borrowers in each silo (market) are only exposed to the risk of 3 assets at any time rather than all the assets in the protocol.

This secure design of money markets protects borrowers against lending hacks, as experienced in previous exploits of Cream Finance, Venus protocol, and, recently, Mango Markets. Because our isolated silos don’t share risk, the Silo lending protocol can theoretically create unlimited money markets.

Our implementation of money markets is drastically different from shared-pool lending protocols like Compound and Aave, where all token assets sit in one market only. As such, if one token asset is manipulated, the entire protocol becomes at risk of insolvency.

The $AURA silo

The Silo protocol will deploy a risk-isolated market for $AURA consisting of three assets: $AURA-ETH-XAI.

This means users can do the following for example:

• Deposit $AURA into the AURA silo.
• Borrow ETH from the AURA silo.
• Deposit the borrowed ETH into the WBTC silo.
• Borrow WBTC from the WBTC silo.

Because both AURA and WBTC silos are isolated, any manipulation of the WBTC silo will not impact $AURA depositors. Soon, $AURA depositors will be able to borrow any of our 68 assets while limiting their risk to one market at a time.

Core Proposal

We aim to create a deep borrow/lend $AURA market for users valuing security. Users of the AURA silo will never have to share the risk with users depositing and borrowing in other markets.

To build a deep market, we are asking the Aura DAO to allocate $100,000 in $AURA Tokens from the treasury to the Aura Silo upon launch. Seeding the pool would help to grow Aura’s Ecosystem and enable its first permissionless lending market.

Benefits to Aura

In addition to making yield on $AURA deposits, this new lending market will enable whole new use cases for token holders:

• Leverage Long/Short.
• Borrowing assets to Farm.
• Delta Neutral farming.

Silo has taken substantial steps to further integrate with the Aura/Balancer Ecosystem, being one of the only lending markets to have a Balancer Oracle integration (which makes this integration possible) and providing incentives to auraBAL voters for its SILO-ETH Pool.

Risk Assessment

The core team has formally verified the entire protocol’s contracts, including price oracles, using Certora. The Silo protocol has been audited by two auditors, Quantstamp and ABDK.

Security reports

https://devdocs.silo.finance/security/audits-and-formal-verification