[Silo Finance] [FINAL] [STIP - Round 1]

DAO Grant Programs Incentive Framework (Round 1)
1

SECTION 1: APPLICANT INFORMATION

Applicant Name: Aiham Jaabari
Project Name: Silo Finance by Silo Labs
Project Description: Silo Finance is a non-custodial lending protocol that creates isolated credit markets for any token asset. In contrast to other lending markets, our lending markets are risk-isolated by design, enabling lenders to modulate risk on an asset basis by choosing the collateral they are exposed to. Our vision is to be the base-layer, permissionless lending protocol for all token assets.
Team Members and Qualifications: [List team members and their qualifications, roles, and responsibilities]

The core contributors team consists of the following members:

Smart Contracts

  • Shadowy Edd: Smart Contract Lead
  • Ihor: Senior Smart Contract Engineer
  • Neo Racer: Senior Smart Contract Engineer

Front-End & Design

  • Siros Ena: Front-End Lead
  • Tyko: Senior Front End Engineer
  • Andrew: Product Design Lead

Research

  • Alex: Researcher & Mathematician
  • Anton: Researcher & Mathematician

Growth & Ops

  • Aiham: Growth Lead
  • Tenzent: Business Development Lead
  • Chutoro: Content, Socials, and Marketing Lead
  • Augustus: Operations Lead
Project Links:

Website: https://www.silo.finance/
Twitter: https://twitter.com/SiloFinance

Contact Information:

Twitter: @SiloFinance
Email: info@silo.finance
Do You Acknowledge That Your Team WIll Be Subject to a KYC Requirement?: Yes

SECTION 2: GRANT INFORMATION

Requested Grant Size: 1M $ARB
Grant Matching: The equivalent of 1M $ARB in $SILO tokens as part of the Silo V2 launch (pending DAO’s approval). The DAO plans to launch Silo V2 on Arbitrum before any other chains.
Grant Breakdown:
Market / Incentivized action Base asset deposit USDC deposit USDC borrow ETH deposit ETH borrow Total allocation
ARB 5.00% 60.00% 25.00% 7.00% 3.00% 27.00%
wBTC 5.00% 67.00% 28.00% - - 12.00%
wstETH - 40.00% 16.00% 31.00% 13.00% 11.00%
USDT 5.00% 67.00% 28.00% - - 10.00%
rETH - 40.00% 16.00% 31.00% 13.00% 8.00%
GMX 5.00% 67.00% 28.00% - - 7.50%
GRAIL 5.00% 67.00% 28.00% - - 5.00%
MAGIC 5.00% 67.00% 28.00% - - 5.00%
DPX 5.00% 60.00% 24.00% 12.00% 4.00% 2.50%
rDPX 5.00% 67.00% 28.00% - - 2.50%
JONES 5.00% 67.00% 28.00% - - 2.00%
PREMIA 5.00% 67.00% 28.00% - - 2.00%
SILO - 60.00% 24.00% 12.00% 4.00% 2.00%
PLS 5.00% 67.00% 28.00% - - 1.50%
GNS 5.00% 67.00% 28.00% - - 1.00%
Y2K 5.00% 67.00% 28.00% - - 1.00%
Funding Address: arb1:0x865A1DA42d512d8854c7b0599c962F67F5A5A9d9

Funding Address Characteristics: 3/5 Safe - controlled by Silo Finance’s core team

Contract Address:

The core team will deploy a new incentive controller similar to (arb1:0x4999873bF8741bfFFB0ec242AAaA7EF1FE74FCE8) that distributes $SILO incentives to lending markets.

SECTION 3: GRANT OBJECTIVES AND EXECUTION

Objectives:

Our primary objective of the grant is to stimulate deposits and utilization of existing markets, while focusing on creating sustainable network effects around deposits that do not rely on long-term incentives.

We believe there are dozens of token assets, including new stablecoins and derivative assets, that need lending markets as part of their growth cycle.

Key Performance Indicators (KPIs):

To track success, we will use three primary metrics:

  • Borrowed TVL in existing lending markets
  • Borrowed TVL in newly-launched lending markets
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?

We believe Arbitrum can benefit in four major areas:

  • Security-First Lending: Silo allows users to modulate risk on a per-asset basis by allowing lenders to select what collateral can be used to borrow their tokens. This means users can personally control their risk exposure and conduct safe lending practices.
  • Lending Markets for All Tokens: By design, Silo Finance can create lending markets for any token assets. Our commitment to this goal is evident in our support for tokens such as $rDPX, $JONES, and $PREMIA etc. that are not available elsewhere.
  • Attracting TVL: Lending markets in themselves drive capital efficiency by giving users access to liquidity without losing exposure to their tokens. By incentivizing TVL on Silo Finance, we aim to drive deep lending liquidity that will contribute to the growth of Arbitrum TVL and its user base.
Justification for the size of the grant:

Silo Finance was the first lending protocol to launch a lending market for the $ARB token. To date, the SiloDAO has streamed over 1M $SILO (> ~$65,000 then) to the $ARB lending market, building the deepest isolated lending market for the token with $6M TVL across $ARB/$ETH/$USDC.e.

The $SILO incentive program covers other isolated lending markets such as GMX, DPX, wstETH, and rETH. This program is financed by SiloDAO and has contributed significantly to creating deep lending markets that see consistent utilization of deposited funds.

1M $ARB will allow us to scale lending both horizontally and vertically by creating new lending markets as well as increasing activities in existing ones.

Execution Strategy:

100% allocated to incentivizing deposit/borrow actions in 16 isolated lending markets that meet the following criteria:

  • Resilient oracles for all underlying assets in the market
  • Sufficient DEX liquidity

Read the distribution framework here.

We will stream bi-weekly incentives to users depositing/borrowing passively.

Any $ARB that is not distributed will be returned to the Arbitrum Foundation.

Grant Timeline:
We plan to distribute the incentives linearly over 3.5 months period, starting October 15, 2023 and ending January 31, 2024.

Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream?
Yes

SECTION 4: PROTOCOL DETAILS

Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.

Is the Protocol Native to Arbitrum?:

Silo Finance was initially launched on Ethereum Mainnet. SiloDAO is set to launch Silo V2 on Arbitrum first to become an Arbitrum native protocol.

On what other networks is the protocol deployed?:

Ethereum

What date did you deploy on Arbitrum?: [Date of deployment]

8 February 2023

Protocol Performance:

1600×1112 198 KB

Silo v1.1 was launched in August 2022 on Ethereum Mainnet and has a secondary mainnet deployment known as Silo Llama as well as Silo Arbitrum. Our total TVL across all markets is $98m with $15.3m TVL on Arbitrum alone.

Since our deployment on Arbitrum, we have grown to be the largest risk-isolated lending market for $ARB with $6.4m TVL. Additionally, we have supported the launch of lending markets for Arbitrum-native tokens such as $MAGIC, $Y2K, $JONES, and $PREMIA which are not available on other platforms.

We have integrated lending market support for Curve LP tokens on Silo Ethereum and believe Arbitrum is home to a broad range of composable products where similar integrations would be suitable - this could include markets for GMX and Camelot LP tokens. Silo has also been used as the base layer lending market for other Arbitrum protocols including FactorDAO and Nitro Cartel.

Silo currently runs a co-incentive program on Silo Arbitrum where we match incentives from partner protocols such as Dopex, GMX, and Gainstrade. Incentives have played a key part in the success of our Arbitrum deployment and we believe a grant will allow us to drive deep lending liquidity and capital efficiency for the ecosystem as a whole.

Protocol Roadmap:

Silo V2 is an upcoming upgrade to the Silo protocol scheduled for Q4 with plans to deploy on Arbitrum first. It is a reconceptualization of the original Silo design that will maintain our risk-isolated architecture while supporting a more extensive variety of tokens and significantly improving capital efficiency. It also includes a veSILO tokenomics upgrade allowing locked $SILO to vote for $SILO emissions gauges on Arbitrum.

We regularly release new markets for tokens and are proud to say we are the only protocol that has a market for $rDPX, $rETH, $GNS, $JONES, $PREMIA, and $Y2K. As the Arbitrum ecosystem grows, we will happily extend support for all suitable tokens.

Audit History:
  • Silo v1.1 Smart Contract Audit (ABDK)
  • Silo v1.1 Smart Contract Audit (Quantstamp)
  • Silo Curve Convex Token Market Smart Contract Audit (Chainsecurity)
  • Silo v1.1 Formal Verification Testing (Certora)
  • Chainlink Price Provider Formal Verification Testing (Certora)

SECTION 5: Data and Reporting

Provide details on how your team is equipped to provide data and reporting on grant distribution.

Is your team prepared to create Dune Spells and/or Dashboards for your incentive program?:

Yes

Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread?

Silo Finance will report on the following aspects:

  • Quantitative: Creating a custom dashboard to track incentives distribution and impact on stated success metrics;
  • Qualitative: Describing any change in distribution methodology for optimization purposes and the results of such changes.
Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream?:

Yes

6 Likes
2

I agree with this proposal

1 Like
3

Hi @Aiham.eth, please observe the timeline of the proposal emphasizing the short-term expectation of the program.

4 Likes
4

Thank you, we will adjust the proposal shortly.

3 Likes
5

Firstly, thank you for your proposal and your enthusiasm in contributing to the Arbitrum ecosystem.

Introduction and Rationale

The proposal requests a grant of 1M ARB tokens for incentivization, comprising roughly 2% of the total 50M ARB available in the program. You’ve introduced an isolated money market, targeting some Arbitrum native DeFi tokens, and aim to enhance liquidity for ecosystem tokens. With a Total Value Locked (TVL) of $16.04M USD on Arbitrum since its deployment in February 2023 and a utilization rate of 27%, the protocol shows promise. We find the collaborative approach with OpenBlocks for incentive distribution and the creation of enhanced incentive programs for partner protocols particularly encouraging. Overall, we think the proposal has merit but could use some refinements for clearer implementation.

Major Concerns

Concern Regarding Incentive Distribution

  • Absence of upfront incentive distribution specification
  • Lack of criteria for ‘high-risk’ and ‘reputable’ assets
  • Our recommendation for change: Provide a detailed incentive distribution plan and define ‘high-risk’ and ‘reputable assets’ prior to grant approval.

Minor Concerns

  • Eligibility criteria need more explicit definitions.
  • Allocation to ARB vaults at 25% might not best serve the broader ecosystem
  • Our recommendation for change: Reallocate less to ARB vaults and more to ecosystem tokens, and provide a more detailed definition of eligibility criteria.

Summary

Castle Capital appreciates the efforts put forth in the proposal and the potential it offers for enhancing liquidity in the Arbitrum ecosystem. In its current form, however, we would like to see further clarification on incentive distribution, asset risk levels, and eligibility criteria before fully supporting the proposal.

Our recommendations are as follows:

  • Provide a clearer incentive distribution plan upfront.
  • Reallocate less to ARB vaults and more to ecosystem tokens.
  • Better define ‘high-risk’ and ‘reputable’ assets as well as eligibility criteria.

We hope our comments are taken in the constructive spirit in which they are given. We’re excited about the potential impact of this proposal on the Arbitrum ecosystem and look forward to further dialogue to refine it.

3 Likes
6

We look forward to your feedback :saluting_face:

1 Like
7

I am a supporter of Silo and would like to see you receive a grant, however, this framework should be for incentives only and not other development work.

35% of this would not actually go to incentives - these grants should not be funding dev work. This framework should be about incentivising products that are already live and working. Anything else should go through a separate programme.

I would like to see this updated taking this into account.

4 Likes
8

Hey @Aiham.eth
Good proposal, I leave you some questions

The parameters for this type of asset would be configured by Silo; or would the user? I’m interested in knowing how they are designing this.

This sounds great, good idea.

How would you define this?

Is it possible that Defillama is not contemplating a market? (maybe LLAMA)?

would you expand this?

Do you mean that the locked will be in Arbitrum?

In view of the partnership with curve (funnel for crvUSD) on ethereum, what are the plans for XAI?

Do you have any silos with bad debt right now?

2 Likes
9

Thank you for your feedback, noted. We are happy to allocate all incentives to the isolated lending markets and later engage with the Arbitrum community about building public goods oracles etc.

Two points to clarify in case the proposal doesn’t make it clear:

  • We’ve suggested allocating 25% to community developers.
  • Community developers don’t include Silo’s team. The SiloDAO is well-funded and funds all development work related to Silo Finance lending app.
1 Like
10

Thank you Jadmat, to your questions:

  • In Silo V1, we deploy markets for assets that 1- has a valid price oracle, 2- has DEX liquidity to facilitate liquidations. Parameters are usually set by the core team after taking into consideration community feedback and others’ such as the team issuing the asset. However, for Silo V2, users will be able to set a market’s params such as maxLTV, LT, etc.

  • A reputable asset is an asset that belongs to a project that is considered not a “rug”. While it is still possible for a project to “rug”, Silo v1 lists assets that 1- cannot be rugged via infinite-mint functions, 2- there is a respected team managing the project. However, given that “reputable” is subjective, as the proposal mentions, we will provide the Arbitrum and Silo communities with a detailed plan for the assets that will receive incentives. That is the reason we are cooperating with OpenBlock. OpenBlock will be the independent party creating the distribution framework and optimizing incentive distribution along the way.
    The framework will be made available to the community for feedback.

  • DeFi Llama reporting misses two aspects:
    1- Borrowed amounts: If you borrow $1,000 of an asset, the reported TVL number is reduced by $1,000. Toggle " INCLUDE IN TVL: Borrows" radio button to see the total number.
    2- It doesn’t include XAI’s TVL in their reporting.
    That’s why we use Silo Observer internally to track such metrics.

  • veSILO: You will lock on Ethereum and vote for emissions on Arbitrum. Unfortunately there is not a technical way to allow for the bridged $SILO to also become the governance token.

  • We will not port the current version of XAI to Arbitrum as we need solid plans to establish deep liquidity for the asset. We might work on a cross-chain version of XAI but we still have not decided. It is something we plan to discuss with the community 2024 Q1.

  • No, fortunately none of our isolated lending markets has suffered bad debt. All markets have A status. You can check Apostro risk dashboard for market ratings (A-E)
    Apostro

3 Likes
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Silo is a terrific protocol operated in a professional manner. Great application. Fully support.

4 Likes
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Hello @Aiham.eth thank you for submitting!

Please note grant funds may only be used to incentivize Arbitrum contracts and can not be used for development or operational costs.

Please edit your submissions to comply with the rule below.

2 Likes
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Thank you for your feedback, Matt.

We will remove Developers and OpenBlock allocations. The entire grant will be allocated to Arbitrum smart contracts and distributed in $ARB.

2 Likes
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Ảnh chụp Màn hình 2023-09-25 lúc 15.28.54
Ảnh chụp Màn hình 2023-09-25 lúc 15.28.541050×272 30.6 KB

I believe Project Name: Silo Finance by Silo Labs.
Do you mind fixing it?
Thanks.

3 Likes
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I love what Silo has build over time and how the team has conceived their vaults. It’s one of the protocol i personally use and learned to like more and more over time.

5 Likes
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We at Premia are fanbois of Silo, a real down-to-earth team. Lending markets are a necessity in maturing financial ecosystems, especially when it comes to our types of products, so we are excited about some cool strategies we may be able to develop together, given our recent launch of Premia Blue (V3). Also, most people may not know this but they were a major player in the onchain remediation of the CRV borrowing drama, no small feat and only achievable with their isolated risk systems. Excited to see you guys in Barcelona next week!

4 Likes
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Fixed, thank you for pointing it out.

2 Likes
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I edited the submission, taking into consideration your feedback and others’.

2 Likes
20

Fully support the proposal. Been personally following and using Silo since inception and absolutely love their offering. I also crossed paths with them during integrations with Jones DAO tokens and I have to say the team has been incredibly professional through the whole process. Good luck!

5 Likes
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+1 for SIlo. They’ve built a protocol that supports Arbitrum native tokens as well as lending markets + degen leverage vaults

4 Likes