Siloed Borrowing

Overview

Siloed Borrowing is a risk management feature that isolates the borrowing activities of certain assets within their own "silo." When an asset is siloed, it can only be borrowed against its own collateral, preventing risk spillover into other markets within the protocol.

Key Concepts

Siloed Assets

• Can only be borrowed against their own collateral
• Cannot be borrowed using other assets as collateral
• Have independent risk parameters
• Managed separately from general pool assets

Risk Isolation

• Prevents cross-asset risk contamination
• Limits exposure to volatile assets
• Protects protocol from market manipulation
• Maintains stability of other markets

How Siloed Borrowing Works

Mechanics

1. Asset is designated as siloed through governance
2. Users can only borrow the siloed asset using that same asset as collateral
3. Each siloed market operates independently
4. Liquidations occur within the siloed market

Technical Implementation

function supply(
    address asset,
    uint256 amount,
    address onBehalfOf,
    uint16 referralCode
) external;

function borrow(
    address asset,
    uint256 amount,
    uint256 interestRateMode,
    uint16 referralCode,
    address onBehalfOf
) external;

Risk Management

Protocol Benefits

• Contained market risk
• Protected primary markets
• Reduced manipulation risk
• Independent parameter optimization

User Considerations

• Limited collateral options
• Asset-specific risk exposure
• Independent liquidation processes
• Market-specific parameters

Governance

Asset Management

• Governance can designate siloed assets
• Risk parameters set independently
• Regular market monitoring
• Parameter adjustments as needed

Risk Parameters

• Collateral factors
• Liquidation thresholds
• Interest rate models
• Supply and borrow caps

Best Practices

For Users

1. Understand siloed market dynamics
2. Monitor asset-specific risks
3. Maintain appropriate safety margins
4. Plan for market volatility

Risk Mitigation

1. Diversify across multiple positions
2. Monitor market conditions
3. Maintain conservative ratios
4. Have exit strategies prepared

Technical Details

Checking Silo Status

function getReserveData(address asset) 
    external 
    view 
    returns (ReserveData memory);

Position Management

function getUserAccountData(address user)
    external
    view
    returns (
        uint256 totalCollateralBase,
        uint256 totalDebtBase,
        uint256 availableBorrowsBase,
        uint256 currentLiquidationThreshold,
        uint256 ltv,
        uint256 healthFactor
    );

Market Impact

Protocol Security

• Enhanced risk isolation
• Protected market stability
• Controlled asset exposure
• Reduced systemic risk

User Impact

• Clear market boundaries
• Simplified risk assessment
• Transparent limitations
• Independent market dynamics

Note: All parameters and configurations mentioned are subject to change through governance decisions. Always verify current settings through the Aave interface or smart contracts.