Hidden Yield Farming Opportunity

Transcript

foreign welcome back to the roll up we have a very special guest today we are talking to tencent from Silo Finance um we're going to talk about all the markets that are on Silo right now gonna take you guys through the app getting back to what we do best which is actionable D5 content so you already see on the screen here we have uh some of the more well-known protocols especially in the arbitrum ecosystem um and tenzen is going to take us through the expert of Silo and uh we're gonna learn how to use Silo uh for some Alpha and uh how to find an edge in uh

in this particular defy app so sends it before we go uh through Silo maybe you could tell us how you got started um in crypto and how that led you to Silo Finance um thanks for coming on man it's a pleasure to have you yeah yeah thank you for having me um yeah so I mean I got started in crypto I think it was 2016 or maybe 2017. um I started actually as a I was doing peer-to-peer Bitcoin uh transactions so I was helping onboard people more or less uh and you know getting a small Commission on top of it um just kind of freelancing doing my own thing um and that really took a step back for

a while up until the the most recent bulra um at which point I had a lot of friends in the space um who brought me in uh and we did really well and you know I ended up joining up on a fund um and then also working with a few Dows like bank or pair swap AP wide um all those guys and actually Stylo as well right um and yeah I mean The Silo team has always been really impressive to me the whole concept was uh who was like it like uh so obvious to me that that was such a great solution um and eventually you know I met up with the team in real life uh just uh over

talking with them on Discord and then finally met up and uh they offered me a position uh as the head BD and uh yeah so been here for about a year now probably um but it's been it's been awesome cool cool very cool so um I think those are probably the best like ideas when it's just so strikingly intuitive like it's like wow you know just give it to me already so um it's it's not it's not like you have to think about it it just makes sense um so what was the light bulb moment um that hate you on Silo and then and then you know we can we can take a deeper

look uh I mean it was it's the risk isolation right because I was working at some of these like smaller protocols more in like a dow member function um but passing all these proposals and then I I did like try to do BD relating to lending with other protocols and you go and you talk to Ave you know you know when you try to compound and well the problem is oven compound canvas too and the reality of the matter is Ion compound will not be able to list the majority of all tokens ever because the way that their model Works um is essentially it's great for efficiency but essentially rather they take all of the assets that you think of

they can be used as collateral and be borrowed and they put them into one pool you can think about it um so the problem with that is if you the moment you introduce a bad asset into that pool right that it puts all of the other assets at risk so it socializes the risk between all depositors and this is even true with their isolation mode it's just a capped risk but it still gets socializes across the entire pool so you are largely relying on governance um and uh and you have to keep up with it right uh with asset listings and we've even seen D listings um happening recently um and with Silo that that's not a problem so the thing with Silo is we do risk isolation so rather than create

this one large pool with all the assets we create an individual pool uh for every asset and the advantage of that is that since every pool is like essentially its own mini lending protocol they're not directly connected so if I launch like Pepe lending markets tomorrow it doesn't have any effect on all of the other markets that we have so Silo has this unique Advantage yeah it makes so much sense like and it's true to the name like the risk is siled um which makes it uh much more uh like just secure in a sense because the risk is is siled but it's not as

efficient so um the Ave the Ave module like you said socializes the risk um one way to think about it is like uh like a like a community health Factor almost like Ave kind of has like one Health factor and it that Health Factor applies to like all of the assets on Ave whereas like uh arbitrum like I'm just looking at the market that you have up on your screen arbitrum's pool would have its own uh Health factor and then dope X would have a different one so it's it's like it's like you know Banks and it's a you know opportune time to be kind of talking about this like

um Silicon Valley Bank you know like it has its uh if it has more debt outstanding then it's it's collateral and cash in the bank it's insolvent right um and on Ave if one of those assets is insolvent then all of them are but in silo you know one of them could be insolvent and it wouldn't affect the other ones obviously there's other risk controls that would prevent them from being becoming insolvent but um it silos the risk so that an uh an issue in one of those pools would not affect another one of those pools yeah and as a depositor really when you

deposit you're you're choosing your risk right so Silo also doesn't have any control over your funds uh our markets are actually immutable they're not upgradable that's uh that's something that other lending markets don't do uh the code can't be changed retroactively uh or upgraded um so where you have a these huge lending pools where they can you know one exploit ruins all of them here you come in and you say hey like I want to lend my usdc specifically to the Arbiter market then I know that I'll be okay so long as you know ethereum and uscc are fine and so long as the arbitrum token uh is fine right got it so I don't have to trust any of the other tokens on this

list for me to deposit it inside of the arbitrim uh markets yeah and it's not just an exploit right like um for instance you brought up Pepe like if Ave listed Pepe and then it depreciated by 90 sorry Pepe holders like it would it would bring the collateral value of Ave way down potentially under the amount of debt that it had outstanding um right right and that sort of liquidations uh come in uh so I mean it once you reach like a certain buffer it's called the liquidation threshold this is coming across all lending platforms uh so let's say you have you deposit a hundred dollars of usdc and

you borrow fifty dollars worth of beef right if the price of each slot Rises up uh it'll come up to the liquidation threshold which is a percentage uh so if you have a hundred dollars here and that's let's say the liquidation threshold is 80 then once your debt is worth 80 it'll take the collateral or but it'll actually it'll put it up for auction and then Liquidators outside Liquidators and our own Liquidator that we do run as a last line of defense uh we'll come in and they'll sell the collateral for the under for the for the debt um now there is uh risk in all lending markets which is you know how do you know that there is enough liquidity uh to sell that collateral for that debt uh right and so that's where there has to

be some form of risk management but isolation tends to do a very good job at that because the pools are limited in size and people you know are not going to deposit 10 million dollars for esdc and yeah uh you know and mean yeah yeah they might have Pepe right right yeah that market Cap's way up um yeah but but the risk isolation does let um it lets you list uh markets with less liquidity um whereas Ave is is limited to only assets with a lot of liquidity so that Liquidators can uh sell the collateral into that existing liquidity

um and bring the uh Health Factor if you will the solvency back to back to normal um cool so let's let's Degen around my friend uh let's do some transactions on on some of your most uh yeah absolutely um just uh just to give you a quick rundown if you look at the majority of all we'll go through our return for the for the demo but if you look at um arbitrary like all of the other lending protocols none of them have 90 of these markets uh like I think one of them has DPX they're all starting to add arbitrary although we were first to Market which is why this is quite large uh nobody really

miss Magic No One lists gns absolutely no one lists rdpx uh and it's largely because they're unable to right um and we also have a very very good Oracle infrastructure so we have support for multiple different types of oracles and things like that um but yeah and then we also try to you know if if we think that a market is unsafe we do run like a little Banner we tell you like hey exability has decreased significantly like maybe don't deposit in here um and we try to you know keep users educated we also have Analytics updates about analytics there we go um we have an analytics dashboard and we

try to keep track of uh Oracle prices and um uh this is the wrong one um let's look at our DPS uh so we we give you like the breakdown of like what's the market price and what's the Oracle price because people don't know that actually market price and Oracle price can be different um right so this is a very well tracking Oracle uh but for something that is lower liquidity uh you know you can have some bigger disparities which you can solve with uh lower ltvs and um you know higher liquidation fees um but yeah um I mean

the core really use cases for Lending markets um I would say uh there's I'd break them down into three right and we'll four maybe right you have just depositing to earn right we do have some silent rewards all sorts of pools you can see um and then the other three are uh shorting longing and uh borrowing to farm so lending lending is actually the the core building block of which uh shorts are built on and actually Leverage is built on um so you can leverage short and long any of these tokens so long as there's liquidity uh I can give you an example right so you can come in here you know say I deposit if

um and this is actually a very cool feature also that we have um borrower will deposit so if you don't want to let your assets be borrowed out by others because you you know you want to be able to withdraw any time or you you're scared about uh you know any manipulation or something like that for more risk adverse users you can turn this off and it will allow it'll make it so no one can borrow your deposit out uh you obviously don't earn the deposit yield but it's uh something to keep in mind if uh if that's uh something new yeah so someone who needs still borrow against their own deposit but it it only that's the only person who could uh

well let's just be able to let's think about like if you if you deposit like 10 million dollars in Armature right of usdc if someone borrows out five million then I'm not going to be able to pull out my full 10 million right I'm gonna have to pull out 5 million first and then the apis will increase and I'll have to slowly pull it out so people pay it back right uh whereas if you deposit protect it you can withdraw at any time atomically got it okay um but yeah so 0.2 East let's put some eth in there you know

I think something like I I might borrow you know I might deposit some R because I want to keep the exposure and then borrow usdc against my own ARB and then I would be able to pull out all of my ARB if it's not if it's like uh not a the borrower well the art style has enough liquidity that you're like you're gonna have liquidity to withdraw anyway unless you're you have some very chat size and uh and someone's gonna come in and borrow it um but uh yeah yeah you can you can borrow against uh non-borrowable deposits uh but yeah this is how you set up a short essentially

you can either start as you know whatever you want to be like your main asset you can use each collateral you can use usdc collateral uh and then essentially you just borrow an asset like r yeah and uh all you have to do is actually you have to take this R token and then you have to sell it for uh USBC and what that does right is you still owe 157 our tokens but you can buy them back at a lower price because you already sold them uh so you have a debt that's denominated in a token um and you you sell it into you sell the the the

debt for uh stable coins or or eth if you're a Trader that likes to trade with uh eth as a benchmark um and then you just buy it back at a later point nice um that's how you would short our absolutely and you can do that with any of these markets uh you can do the reverse as well and that's a long right so if I instead you know deposit the art and then uh borrow usdc right then I'm taking stable coins and I'm buying more are and actually my I'm I'm holding twice as much arm you could say uh with uh with the same amount of

money which is how margin uh works totally right because uh if your arm goes up you would have uh double the profit um and then you could Cash Out by the usdc back and return it uh to repay your loan awesome yeah and we have very uh nice nice graph you know you can uh kind of uh come over here and it'll give you a very simplified version and also give you the steps on how to set up a position like this we have a borrowing to short to leverage here oh so I see the borrow to farm uh strategy as well is that is that like um

okay so some eth strategies you could Farm um and then I also want to want to talk a bit about uh like The Silo token um so so maybe we could run through like why someone would borrow to farm and then get into the the tokenomics of siwa yeah yeah absolutely and I can give you a great example for a bar to farm actually because um apartment like my my personal bread and butter I've been doing it for many years um which is uh one of the main use cases that I was using Shiloh for prior as well as well as literally literally right now but thanks

um cool so borrowing the farm would be like this right I have eth right and I want to hold my Eve uh and I'm earning two percent yield on it right here by just depositing it which is fine uh but what if I want to earn more than two percent right and I don't want to buy more if you know maybe this is just as much either because I want to hold um so what can I do to actually earn more is I can borrow a stable coin right and then you can do something very simple like you can put it in a curve uh or you could put it in any other D5 protocol a stablecoin pool essentially you can you can take the the UCC and you can put it somewhere else that earns more um and then that just it heightens your

yield to the point that you can get you know yield on any of the assets on the platform most a lot of these assets don't even have native yields um art would be one of them right um but yeah you can borrow it you know I I pretty I very much like our guys that Jonestown so this is uh God BBN uh but you know are you seeing are you seeing uh like much on on Jones now or on curve um as far as like uh like a profitable opportunity to to farm like what what do you personally like uh farming right now

well so I have a position where I'm borrowing actually on Main net uh so on mainnet if you um if you see we use usdc on on arbitrary uh but on mainnet we use something called zai and zai is our own stable coin um and essentially it's a CDP stable coin so a collateral debt uh position uh back to stablecoin so it's backed by collateral network uh majority is usdc rep State D CDE uh so this is like the underlying collateral for it uh our youth as well I love those guys and uh Olympus as well home

um NGO uh obviously we have a ton of other markets and then we have we spread out a little bit of backing to um each of the markets as well but the primary source of all the backing is up here um but yeah so you can borrow out xai and you can even see right here is designed a little Banner it says I earns this amount um and that's because we have a incentivized curve pool uh paired with uh we we own about 260 000 CVX and we use it to vote on the pool uh consistent consistently um that combined with some votes with uh supporters from the frax ecosystem

um we get 11 to 14 yield depending on how much you lock for 11 you get the 11 for locking for two weeks I think okay yeah and then for the 14 I'm pretty sure it's a one year lot for for France and that has to do with their cages so I could deposit if like hold hold uh my same position uh borrow some zai against my Eve with and and because I I wouldn't sell my zai for anything or or use it even if you're not taking even if you did if you did Zion is uh pegged to one dollar right so you you're selling a

stable coin so you're you're just shorting the peg of zai you're still uh technically um completely uh unexposed even if you sell the desire for something else although obviously whatever you sell it for you know if you sell it for more eat than your long beef right if you sell it right right so if I didn't want to go long anything else and I just wanted to like earn the yield from farming I could just take my zai and deposit it into a uh uh frax like XY frax LP or a Zai curve pool yeah exactly you just come over here to curve and right here you can deposit oh nice and we have actually some people

building uh some strategies to automate this to make it less gas intensive for users cool um yeah and uh yeah we've got a lot of uh collaboration in the works foreign so this is getting uh it looks like nine percent in curve and then you can boost it on convex if you bring your LP over to convex yeah exactly and convex cracks version of comics what's the uh oh okay and then what's the um the borrow rate on Sila anzai yeah yeah it's love it's right here it's the you know let's see if we

can look by the highest right the highest is RPL these guys are they like borrow it so uh but yeah I mean you can see like in on CBE five percent uh you're probably better off looking at the highest liquidity markets if you use usdc it's only 2. if I deposit usdc is collateral I could borrow against uh my USBC I could borrow uh Zai at two and a quarter percent and then go take it over to curve and earn nine percent exactly and actually the there is also a your factory vault um so if you want if you don't want to deal with the auto compounding you know I mean you don't want to like play the

rewards and put the cycling back in the whole ordeal um you we do have uh and these are the factory vaults so uh what this will do is it it will allocate it in between different uh pools obviously it doesn't have very much money right now so that's what the apy is a bit lower because it's social license because costs um but uh I know yeah they do a great job um and then they have multiple strategies that they actually apply uh because we have multiple pools yeah um so yeah and this is a good way to just set and forget basically yeah that that's interesting because it's almost

like especially if you're using the usdc Vault or Silo like you don't have any exposure you just deposit a stable coin you borrow a stable coin all your exposure is in stable coins and you could earn seven percent spread by borrowing at two percent and then lending it back out to curve at nine percent yeah yeah and technically there's no liquidations also in the usdc market because we We heart we soft it's just it's a uh if you're familiar how like uh something like memworks uh it works like that in that design in terms of the actual lending is pegged to the value of the dollar

um and actually for the feed that we use we use usdc specifically because we're paired with them uh this is after we what happened with the whole usdc debug scenario right noticed that this was kind of like a flaw in the general system uh that not just us but everyone was using so we switched instead of using the USD pricing usdc pricing because that is actually our backing collateral uh right got it okay um but yeah so essentially they're using the same Oracle so there's no way that they're going to get liquidated uh unless you'll just let interest build up for a very long time right right right right right so you would have to or you not that you would have to but you would want to take some of your uh

earnings you know if you're if you're doing the seven percent spread position with size you would want to use some of the profits that you earned from that seven percent to pay down the interest that you that you accumulate on uh the side position from borrowing it yes yes but you again the interest rate is so low and there is actually a buffer between how much you can borrow and uh in the liquidation which I believe is yeah so the Maxwell TV Max circulation virtual 95. Okay so it would take like two and a half years even if you borrowed like Max to to go from uh to get liquidated okay so that that makes sense

um that's that's super cool like I mean this is this is like D5 summer style stuff but like in you know two years evolved and now um it's gotten it's gotten much more complex um but also the opportunities are there um you know you just kind of got to know where to look yeah yeah and I mean something that's also very interesting with the other side of borrowed a farm right is uh if you're someone that just holds stable coins right um what you can do is you can actually deposit a stablecoin and maybe borrow a high yielding asset right uh so uh well this one something that's uh

uh like a good example would be maybe like well actually I think don't mix is a great example uh dopex right you can come in here you can deposit uscc you're in three percent plus four point three percent that's seven point three percent uh and then you can actually borrow out uh PPX DPX you borrowed for literally one percent uh and we have a lot of liquidity here and a DPX can actually be put although this is a little bit Degen right because there is some some Peg stuff going on but you can put it in something like plutus um

right so you could put it in the DPX PLS DPX pool right uh and I believe it's something insane hold on oh my gosh well let's see maybe they stopped the Nitro pull oh no yeah see PLS DPX 59 59 percent yes yes and this is this is with uh well you with no lock up I believe this would be uh like 40 no wait no no okay no 59 without lockup up to 70 wow right and that's unstable Goods because

you're borrowing the DPX so you're not exposed to the price uh you're only exposed to the peg between PLS DPX and DPX right because you're borrowing DPX and then you're also you're just depositing it so you're gonna have the same amount of DPX when you want to repay your loan you'll actually have more because you're earning 59 more DPX uh APR the only thing to keep uh keep aware of is again is a peg right so PLS DPX tries to trade trade one to one uh but it can go under right um but again if you're more of a long-term person um it should be an issue because you're going to be earning such a massive amount

got it awesome yeah and yeah please oh yeah I just wanted to add also you know always be mindful of liquidations liquidations can happen and liquidations can be expensive um so don't get liquidated uh you know don't Max borrow there's a healthy uh uh Health Factor um and yeah yeah don't don't let the liquid news take you yeah because they will yeah cool man well and this has been this has been really helpful um uh thanks for joining you know before before you go maybe you could describe um just kind of like the elevator

tokenomics for celo um is it kind of like uh like a bribery coin or a governance token you know what what's the uh what's the view for it so I mean it is a governance token in that it does control certain aspects of the protocol again the majority of the protocol is immutable so it can't even be changed by the token holders uh but it can edit things like interest rates and it can whiteness uh oracles uh so that we can register them um but yeah so it has uh governance capabilities it obviously we have a large treasury which it governs um and then our big we do have a buyback so we have I think

four million of protocol home liquidity for zai and then we also have around 1.3 million dollars worth of CVX I want to say so we use the CVX to vote for zai we Farm design and we we literally earn back basically everything that we we pay and we use that also to bribe certain things and um and then we also uh take the revenue and we use it to buy back the token and that's actually how we support our incentives so our incentives are not inflationary we're not like printing tokens or taking them out of the treasury uh they're coming purely through Revenue it's sourced by us buying the token off the market uh these rewards that you see here and here and

here um but again uh Shadow B1 has been live for uh 261 days uh but we will we have been working on our V2 uh and that's where the big tokenomic upgrade also comes along with the V2 which is a big architectural and it's Innovative it's got a lot of stuff um but yeah we will have essentially a be model and uh with with some small tweaks that are to make it fit better without a landing protocol obviously I'm not allowed to say very much that's all right I will we won't push you too too far down V2 keep a little secret sauce for the uh for the uh

announcement um hopefully we can do another uh another video um around V2 kind of explaining it to our audience and then when it is live uh do another demo of uh the V2 user experience um absolutely that that'd be awesome so yeah uh for anyone who's watching this is celo finance be on the lookout for uh V2 uh don't steal all of our yield um use responsible Health factors and don't get liquidated yes thank you thanks tanzan