Silo V2 Lending Reduces Risk and Ramps Up Rewards on Sonic

Risk-isolated lending protocol Silo has launched V2 of its protocol on Sonic, the high-speed Layer 1 that was once known as Fantom. Risk-isolation has always been synonymous with Silo, whose lending and borrowing protocol has hundreds of millions of dollars in TVL, but Silo V2 gets granular by allowing for meticulous fine-tuning. Lenders can now earn rewards that are proportionate to the risk associated with the underlying assets.

Less Risk, More Reward

DeFi can be a risky business, as even the most casual of onchain explorers will attest. Silo is in the business of dialing down that risk when it comes to lending, something it’s gotten a real handle on with the launch of V2. The latest iteration of Silo’s decentralized protocol, deployed on Sonic but also poised to be introduced to a host of other EVM chains, and it’s packing a punch when it comes to yield parameters.

With V2 comes programmable markets, and with programmable markets comes the ability to dictate the reward ratio assigned to each pool. The most obvious way to use this capability is to scale rewards in line with the amount of risk associated with each token. If you’re lending stablecoins, the APY should be low; if you’re lending exotic cryptos, it can be higher. That’s the basic theory behind it.

Any Market, Any Asset

DeFi, as we’re so often told, is all about composability. Anyone can build anything using the open-source code of any other thing. It is a scrapyard in which cannibalization is encouraged, and the only limits are your coding skills and your imagination. For third-party devs brave enough to poke around with Silo V2’s chassis, they’ll find a lot that’s to their liking. Much of this is down to “hooks” – programmable components for bolting on features that allow your lending pool to be served just the way you like it.

DeFi devs may have previously encountered hooks in the context of projects such as Uniswap, which introduced them with V4. In its V2, Silo is using them to support fully customizable lending markets. And this doesn’t simply mean choosing which token is added to the pool – Silo’s hooks are way more flexible. Options include cross-chain isolated markets, permissioned pools for RWA users, self-repaying loans, and fixed-term lending.

Lending on Steroids

Initially, the primary users of Silo V2 will be retail – end-users in other words, who’ll be accessing its risk-isolated lending markets on Sonic and other EVM chains where it’s introduced. But it doesn’t take a crystal ball to appreciate that in the longer term, V2 has the potential to underpin a whole lot more of the multi-billion-dollar onchain lending sector. We’re talking institutional platforms, white label lending applications, wallet integrations, and much more.

Risk isolation is the selling point but hooks are the secret to getting DeFi builders hooked on the formula that Silo’s perfected for facilitating lending without the usual array of hazards that come bundled as standard. That’s not to say it’s 100% risk-free – this is crypto after all – but compared to the legacy lending platforms that defined the first wave of decentralized finance, Silo looks like real progress.