[BIP-100] Allocate BAL Liquidity to Silo Finance

TL;DR

• Silo Finance requests a capital injection of 16,500 $BAL ($100,000~ at the current price) into the Silo Protocol - BAL 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 BalancerDAO at any time and would provide additional revenue to the BalancerDAO treasury.
• Silo Finance has been an active ecosystem participant in Balancer via Oracle Integration and providing voting incentives to veBAL holders.
• Silo Finance will reciprocate the BalancerDAO’s liquidity seeding by providing $100,000 XAI into the Balancer Silo.
• Silo Finance’s smart contracts are fully formally 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 $BAL 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 $BAL silo

The Silo protocol today lists a risk-isolated market for $BAL consisting of three assets: $BAL-ETH-XAI.

This means users can do the following for example:

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

Because both BAL and WBTC silos are isolated, any manipulation of the WBTC silo will not impact $BAL depositors. Soon, $BAL 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 $BAL market for users valuing security. Users of the BAL 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 Balancer DAO to Silo Finance would like to request an allocation of 16,500 $BAL Tokens to the Balancer Silo by the treasury. Seeding the pool would help to grow Balancer’s Ecosystem and bolster its liquidity in lending markets.

SiloDAO’s Credit Line

If the proposal is successful, the Silo DAO will make $100,000 XAI available to $BAL depositors. In addition to making yield on $BAL deposits, depositors can borrow the stablecoin to leverage their positions.

Silo has taken substantial steps to further integrate with the Balancer Ecosystem, being one of the only lending markets to have a Balancer Oracle integration and providing incentives to veBAL 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

Specifications - On-Chain Instructions

To deposit $BAL into the Balancer silo, the treasury multi-sig would need to do the following:

1. Approve BAL transfer to BAL silo 0x92e7e77163ffed918421e3cb6e0a22f2fe8b37fa
2. Call deposit(address _asset, uint256 _amount, bool _collateralOnly) on Silo contract (0x92e7e77163ffed918421e3cb6e0a22f2fe8b37fa) where _asset is BAL address, _amount is amount of BAL deposited and _collateralOnly is false.