Risks

Using any DeFi protocol is not risk-free. Users should familiarize themselves with the risks of using the Silo Protocol before interacting with any of its smart contracts.

The following is a non-exhaustive list of risks associated with Silo.

Smart Contract Risk

The Silo Protocol consists of smart contracts that may contain vulnerabilities or other errors that may result in the loss of user funds. While contracts have been thoroughly internally reviewed, users should be aware that undiscovered issues may still exist so always exercise caution.

Silo's core contracts are fully audited and formally verified with an ongoing bug bounty program.

Collateral Risk

Silo's permissionless nature allows markets for any ERC-20 token to be created. Token contracts may be exploited or have hidden functions that put lender funds at risk.

The Silo Protocol's isolated design gives full control over risk exposure to the user - if you do not trust a token, do not deposit into that market.

Oracle Risk

Prices are sourced from oracles that are operated by third parties. Issues with oracles may result in unexpected liquidations or loss of user funds from undercollateralized borrowing.

The Silo Protocol uses industry leading oracle providers such as Redstone and Chainlink that are broadly accepted.

Liquidation Risk

In the event a borrower's position exceeds the liquiation threshold, they may be subject to liquidation. Their collateral will be seized and sold to pay their outstanding loan with liquidators receiving a fee.

Liquidations are a common mechanic in virtually all lending markets and necessary for solvency.

Bad Debt Risk

If any of the above risks actualize, loss of user funds may be possible. This may mean lenders in an affected silo are unable to withdraw some or all of their deposit.