NEW YORK, March 27, 2026 (GLOBE NEWSWIRE) — Silo, a decentralized finance lending protocol identified for its remoted lending markets, has launched Silo v3—a brand new cash market designed to handle a core assumption in DeFi: that collateral should be liquidated into the mortgage asset instantly to maintain lending markets solvent.
Silo v3 introduces a protocol-level mechanism that protects lenders even when collateral can’t be bought effectively on decentralized exchanges. By decoupling solvency from real-time liquidation into the mortgage asset, Silo v3 permits lending markets to scale with asset fundamentals moderately than liquidity constraints, marking a structural departure from the dominant design assumptions underlying most DeFi lending protocols right now.
“Liquidity has been one of the biggest structural constraints in DeFi. Thousands of assets have real fundamental value, but without deep, instant onchain liquidity, they’ve been excluded from credit markets or introduced hidden risks for lenders.
With Silo v3, we remove that dependency. We’ve redesigned the lending model so solvency no longer hinges on perfect market liquidity, and lenders are compensated explicitly through liquidation discounts and fees. This shifts the risk balance in favor of lenders while unlocking access to entirely new categories of collateral.
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We believe Silo v3 represents a structural evolution in onchain credit—expanding what assets can access lending markets while making those markets safer by design.”
— Silo Founding Crew
A Structural Drawback in DeFi Lending
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In most DeFi lending protocols, insolvency threat is addressed by means of compelled asset gross sales. When a borrower’s place turns into undercollateralized, the protocol makes an attempt to promote collateral on a decentralized trade to repay lenders within the mortgage asset.
In apply, that assumption often breaks down. Liquidity can turn into fragmented, uneconomic, or quickly unavailable during times of market stress, limiting lending markets’ capacity to perform reliably as they scale.
How Silo v3 Modifications the Mannequin
In instances the place liquidation by means of markets is infeasible or unprofitable, Silo v3 repays lenders by swapping the collateral asset itself into the mortgage asset (debt), thereby sustaining solvency.
Every Silo v3 market defines two immutable liquidation thresholds for the collateral asset. Above the DEX Liquidation Threshold, positions are liquidated by means of decentralized exchanges or redemption mechanisms. Above the Collateral-Debt Swap Threshold, the protocol prompts an alternate path that swaps collateral into the mortgage asset at a reduction—absolutely overlaying lenders even when exterior liquidity is inadequate, fragmented, or delayed.
Liquidations as a Supply of Yield
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Beneath Silo v3’s design, liquidation occasions usually are not solely loss mitigation mechanisms. Most liquidation charges are paid to lenders, compensating them for the chance they assume during times of market stress. Because of this, liquidation occasions can function a second supply of yield, along with curiosity.
Increasing the Scope of Onchain Credit score
By eradicating the requirement that collateral be bought to repay lenders, Silo v3 permits lending markets to assist a broader vary of onchain belongings whose worth is probably not constantly accessible by means of liquidity on decentralized exchanges. These embody liquidity supplier positions and structured LP tokens, liquid staking and restaking representations, time-locked vault receipts and tokenized methods, and CEDEFI belongings with offchain redemption paths.
Silo emphasizes that the protocol is just not designed to make low-quality belongings lendable and that asset high quality stays decided by market participation moderately than protocol enforcement.
Remoted Markets and Threat Transparency
Silo continues to function remoted lending markets, the place every market pairs a particular collateral asset with a mortgage asset. This design prevents threat contagion between markets and permits parameters to be tailor-made to the distinctive properties of every asset.
With Silo v3, this structure is complemented by a brand new lending utility that gives specific threat scoring and full market-level disclosure. Customers can clearly see liquidation paths, oracle dependencies, and the way collateral is anticipated to behave beneath stress—bringing transparency to dangers which might be usually implicit in different lending protocols.
About Silo
Silo is a decentralized lending protocol that operates remoted cash markets and gives vault curation options throughout a number of blockchain networks.
For extra info, go to: Web site | X | Discord | Telegram | GitHub
