The lending protocol Silo V3 is live

Silo Finance has launched Silo v3, a new iteration of its decentralized lending protocol that is now live and positioned as a redesigned class of onchain money markets focused on lender protection and risk isolation. The core change in v3 is a move away from the standard DeFi assumption that collateral must be liquidated immediately via decentralized exchanges (DEXs) into the loan asset to keep markets solvent. Instead, Silo v3 introduces a protocol-level solvency mechanism that seeks to protect lenders even when collateral becomes illiquid or cannot be efficiently sold on DEXs. In Silo v3, each market remains risk‑isolated, pairing exactly two assets (one collateral, one loan asset), each with its own oracle, interest rate model, and liquidation parameters, so that potential problems in one market do not spread to others. The upgrade adds a second liquidation path called Collateral‑Debt Swap (CDS): when DEX-based liquidation is infeasible or unprofitable, the protocol writes off the borrower’s debt and distributes the collateral itself to lenders at a defined discount, aiming to eliminate bad debt and maintain solvency regardless of external liquidity conditions. Liquidation fees are directed primarily to lenders, turning liquidations into an additional yield source on top of interest, and the new app surfaces risk scoring, liquidation paths, oracle dependencies, and stress behavior to increase transparency for users. Silo v3 is also being deployed as an onchain credit layer across multiple networks, including dedicated money markets on Injective, where the first yINJ/INJ market is live and more pairs are planned. By decoupling solvency from real-time DEX liquidity, Silo v3 is designed to support a broader range of collateral types—including LP tokens, liquid staking and restaking derivatives, time-locked vault receipts, and tokenized strategies—while preserving isolated risk per market. This positions Silo among the leading DeFi lending protocols in 2026 that compete on differentiated risk models and credit design, alongside platforms such as Aave V3, Morpho Blue, and Euler V2.

✨ AI-generated background, compiled from web sources — not editorial content.

More coverage

• Silo Introduces Silo v3, a New Class of Money Markets Designed to ... (beincrypto.com)
• Silo Finance Onchain Credit Markets Go Live on Injective (injective.com)
• Silo Finance | ETHGlobal (ethglobal.com)
• Best DeFi Lending Protocols 2026: TVL, Rates, Risk Compared - Eco (eco.com)
• Silo v3: Isolated Lending, Higher Yield & Lender Protection (silo.finance)