Silo V2 lending reduces risk and increases Sonic’s reward

Risk Separation Lending Protocol Silo has launched its protocol V2 at Sonic, the fast layer 1, once known as Fantom. Risk separation is always synonymous with SILO, and while its lending and borrowing protocols have hundreds of millions of dollars of TVL, the Silo V2 becomes granular by allowing for meticulous tweaks. Lenders can now earn rewards proportionate to risk associated with underlying assets.

Less risk and more rewards

Defi can become a dangerous business, as even the most casual Onchain Explorer proves. Silo is in the business of dialing down that risk when it comes to lending. This was something that was treated like a real treat with the release of the V2. The latest iteration of Silo’s distributed protocols has been deployed to Sonic, but is poised to be deployed in many other EVM chains, packing punches when generating parameters.

V2 has a programmable market, and programmable markets have the ability to direct the reward ratio allocated to each pool. The most obvious way to use this feature is to scale your rewards along the amount of risk associated with each token. If you are lending stub coins, your APY must be low. If you are lending exotic codes, it can be expensive. That is the basic theory behind it.

Any market, any asset

defi, as we often say, is about all complexity. Anyone can build anything using the open source code of other things. It is a scrappy where cannibalism is encouraged, and the only limitation is your coding skills and imagination. For third-party developers brave enough to get bored of the Silo V2 chassis, they will find a lot that suits their tastes. Much of this falls on “hooks.” This is a programmable component for bolting the functionality that can provide the lending pool any way you like.

It is possible that Defi developers have encountered hooks previously in the context of projects such as UniSwap that introduced them in V4. In V2, Silo uses them to support a fully customizable lending market. And this does not simply mean choosing which tokens will be added to the pool. Silo hooks are more flexible. Options include cross-chain isolated markets, permission pools for RWA users, self-retransmit loans and fixed term.

Lending for steroids

Initially, the main users of Silo V2 are retail. This means access to locations introduced in lending markets classified as risks related to Sonic and other EVM chains. However, crystal balls are not necessary to understand that in the long run, the V2 could support the multi-billion dollar on-chain lending sector even more. We’re talking about institutional platforms, white label lending applications, wallet integration, and more.

While risk separation is a selling point, hooking is the secret to hooking defi builders into completed formulas to promote lending without the usual set of risks bundled as standard. That’s not to say it’s 100% risk-free – this is a crypto after all – but compared to the legacy lending platform that defined the first wave of decentralized funds, silos look like a real advancement.