Today we are excited to finally announce our new DeFi product that we have been developing for over 6 months. This new product is called ‘Silos’. Silos are the next evolution of DeFi.
What is a Silo?
At its core, Silos are a new DeFi tool that allows users to create personalised and fully automated DeFi tasks in seconds. Users can select from our catalogue of predefined strategies and deploy their very own smart contracts based on the settings they choose, and all with no coding experience required!
Silos are monitored on each block (every 2 seconds on Polygon) by ChainLink Keepers (bots) and the predefined strategy is executed if required.
The actual execution is determined by either the user’s chosen schedule and/or automatically for tasks that require certain criteria to be met.
The available strategies will vary in their capabilities and the catalogue or predefined strategies will grow over time as new opportunities become available in the DeFi space. Some strategies will offer advanced yield farming opportunities while others will offer more modest operations such as converting income to one or more other tokens (dollar cost averaging for example).
If a strategy generates income, the proceeds are handled according to the settings that the user has chosen. Funds can be proportionally reinvested back into the strategy, sent to another Silo or even transferred to another address or Protocol of their choice.
Allowing Silos to send funds between each other (and other addresses) allows the owner to mix and match strategies as they choose, fully customising and automating their DeFi life.
Strategies will eventually be rolled out across many of the popular chains and cross-chain interaction between these chains will be seamless within Silo strategies.
Small fees are charged on certain tasks. As with all Gravity products, these admin fees are all sent to the Fee Manager contract which then distributes them to GFI holders (50/50 wBTC/wETH) . GFI holders are also offered reduced fees based on their Tier.
Ownership and Asset Handling
When a user launches a Silo, they are not joining an investment pool, they are deploying their own smart contract in which they are the sole owners. They are the sole person who can configure the strategy’s parameters and access the assets held inside the contract.
The exact parameters will vary between strategies but in general they will allow the user to configure things to suit their overall strategy and/or risk appetite.
Ownership of the individual Silo is represented by an NFT which can be transferred to a new owner (including smart contracts). This also allows 3rd parties to build advanced DeFi strategies easily.
Silos ability to receive and forward tokens to and from other Silos, wallet addresses and protocols such as lending platforms allows for extremely flexible setups. Deposits do not require interaction with the Silo smart contract and you can simply transfer tokens to the Silo address should you need to. This makes Silos very versatile and accessible without any technical know-how.
Maintenance and Automation
Silos are maintained by Chainlink Keepers. By utilising Keepers, Silos are fully decentralised and independent of any other platform including Gravity Finance.
Keepers monitor each Silo constantly and check on each block (every 2 seconds) to determine if they need any function calls to run the strategy.
To manage your network of Silos, users must maintain a balance of LINK in their ‘Gravity Finance Upkeep Manager’. Link is the currency that is used to pay for transactions. Each transaction is charged at “Gas Cost + 70%”.
For non-critical actions, users have control over how often the strategy is executed. You might choose an hourly, daily, or even weekly execution.
Our Strategic Focus
Although we will be offering many regular yield farming opportunities, our focus has been primarily on delivering high yielding strategies without the added risk of Capital or Impermanent Loss.
Traditionally, to prevent these kinds of losses, stable coins are simply staked either as a single asset (USDC for example) or as part of a stable liquidity pair (USDC-USDT for example).
While there is nothing wrong with this approach, the available yields are generally very low (below 20%). The alternative is to stake non-stable coins or LPs to earn higher yields but the added risk of market fluctuations make these kinds of investments too risky for more conservative investors.
We have integrated several powerful methods into Silo strategies that allow users to earn high yields but maintain the security of stable coins. These kinds of strategies are already possible but require so many manual transactions and constant monitoring that they are simply too risky and too complicated for the average user. We are bringing these strategies mainstream!
We use combinations of the following methods, to generate exceptional yields;
Method 1 — Borrowing the Underlying Asset
This involves borrowing the underlying asset. As an example, a user might deposit USDC into a Silo which is then lodged as collateral on a lending protocol like Aave.
Another non-stable token is then borrowed that can be staked to generate higher yield, either via single asset staking (SAS) or combined with another pegged or stable asset to create and stake liquidity tokens.
For SAS staking, this strategy can yield up to 80% of the farm’s original yield whilst eliminating any capital loss potential. The borrowed asset can always be paid back in full at any time!
For LP staking, the principle is the same however the impermanent loss potential is not 100% eliminated. It is however reduced down to 1–2% in most cases.
The risks associated with this strategy are introduced by the borrowing component. If there were significant price fluctuations in the borrowed asset, there could be a scenario where the loan is liquidated leading to losses and exposure to the borrowed asset’s price movement.
To attempt this type of strategy manually whilst maximising yield, requires 24/7 monitoring and very fast fingers to prevent losses.
Silos solve this problem by monitoring the Collateral to Debt ratio(CTD) of the loan (every 2 seconds) and automatically performing a “Rebalance” of the entire strategy if required (i.e. move funds from the farm to the loan to increase collateral for example).
Method 2 — Folding
Folding involves borrowing an asset and then investing the borrowed asset into a protocol where the token you receive in return can be used as collateral to borrow more.
The result can earn you up to 4x the regular yield on the initial deposit amount.
A simple example would be as follows;
A user deposits $100k worth of wFTM into a Yearn “Earn” vault, earning 8% return. They receive yvWFTM in return (vault IOU token). They then take the yvWFTM and use it as collateral on MAI Finance to borrow up to 75% of it’s value in MAI stable coin (at 0% interest).
The User then takes the MAI and converts it into wFTM. They then deposit the wFTM into Yearn and repeat the process many times until they can’t continue.
The end result is earning 8% on $400k instead of 8% on $100k. In this case, the user may also earn extra yield on the MAI loan through Qi incentives.
This example does however expose the user to a greater amount of FTM through leverage which is good if the FTM increases in value but not so good if it decreases in value.
This added exposure can be mitigated via hedging an equal amount of FTM to offset any losses; however this strategy also works with interest bearing stable coins, eliminating the exposure risk altogether.
Any risks associated with loan liquidations are also monitored and rebalanced within Silos, eliminating any human error.
The Silos Launch Plan
Our Launch plan consists of 3 phases
- Private Beta Phase 1
- Private Beta Phase 2
- Public Launch
Private Beta Phase 1
During this phase, the Gravity team along with representatives from Chainlink will pressure test the core Silos protocol to ensure the underlying infrastructure is performing at peak performance. During this phase, the strategies will be limited and focus will be on the underlying functionality.
Private Beta Phase 2
This phase will see the invitation extended to a small dedicated group of people from the Gravity community, as chosen by the Gravity team. During this phase, we will be delivering some of the more exciting strategy types mentioned above. We will also be introducing Fantom strategies during this phase, bringing Gravity multi-chain for the first time!
Following a successful beta period, an official launch will be targeted for the end or March or early April. The exact date is depending on the beta outcomes and will be determined closer to the date. This launch will be accompanied by marketing from our Team as well as our partners and product integrated protocols (Chainlink).
We look forward to rolling out Silos ASAP and encourage the community to get involved! If you become aware of any high-yield strategies please get in touch with suggestions for us to look into.
We sincerely appreciate the community’s support and understanding during this development period where we had to intentionally keep our product details close to our chest.
We also look forward to releasing our next “product” which is an interest bearing stable coin offering consistent and sustainable high yields. When used in conjunction with some of the methods discussed in this article (folding), the possibilities are VERY exciting. We can’t wait to announce further details on this soon.