Silo Finance — Weekly Risk Report (Week 2)

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Silo Finance — Weekly Risk Report (Week 2)

This report provides a structured weekly risk review of lending markets on Silo Finance. The objective is to identify pools with elevated liquidation, oracle, and liquidity risk under stressed market conditions.

Markets are divided into two segments:

Section A: Core Pools (> $100K collateral deposits)
Section B: Long-Tail Pools (< $100K collateral deposits)

For week 2 we’ll take into account only Section A pools

Risk labeling excludes smart contract exploit risk and focuses on market structure, liquidity depth, oracle design, and liquidation viability.

Section A (>$100K Collateral)

High Risk Methodology & Rationale

In this section, we provide a pool by pool breakdown of all Section A markets labeled High Risk, explaining the specific failure modes and risk drivers for each pool (excluding smart contract exploit risk).

Our risk classification is based on a multi factor framework that includes:

  • Oracle design and price feed freshness
  • On chain liquidity depth and exit capacity
  • Market size and effective TVL concentration
  • Borrow utilization and available liquidity buffers
  • Collateral volatility and correlation risk
  • Parameter sensitivity (mLTV / liquidation thresholds)
  • Structural and market specific constraints

We also run forward looking scenario analysis using our internal monitoring and stress testing tools to evaluate how each pool behaves under adverse market conditions.

High Risk Pools — Detailed Breakdown

Pool 181 — siUSD / USDC

Key Observations

  • Total siUSD DEX liquidity: ~$4M

  • Total siUSD used as collateral: ~$5.2M

  • Documented siUSD depeg history

  • Collateral size exceeds reliable exit liquidity

Primary Risk Drivers

  • Liquidation cascade risk under stress conditions

  • siUSD depeg → liquidation failure → bad debt formation

  • Potential death spiral scenario if:

    • price deviates,

    • liquidation incentives are insufficient,

    • gas costs spike simultaneously

Failure Mode

If siUSD depegs and liquidators cannot exit positions profitably due to shallow liquidity and execution costs, liquidations stall and protocol bad debt accumulates.

Suggested Actions

  • Increase siUSD DEX liquidity depth

  • Reduce siUSD deposit cap

  • Temporarily reduce mLTV to ~80% until liquidity and stability metrics improve

Pool 168 — siUSD / USDC

Key Observations

  • siUSD collateral exposure remains elevated

  • Known historical depeg behavior

Primary Risk Drivers

  • Same structural exposure as Pool 181

  • Liquidation cascade and death spiral dynamics

  • Liquidity vs collateral imbalance risk

Suggested Actions

  • Increase siUSD liquidity depth

  • Reduce deposit caps

  • Lower mLTV to ~80% until stabilization

Pool 162 — weETH / ETH

Key Observations

  • weETH DEX liquidity on Arbitrum: ~$3M

  • weETH collateral deposited: ~$3.6M

  • Oracle-dependent pricing

Primary Risk Drivers

  • Oracle freshness / update lag risk

  • Liquidity thinner than collateral base

  • LST derivative pricing sensitivity

Failure Mode

Oracle lag or stale price combined with thin exit liquidity can produce under-liquidation and bad debt.

Suggested Actions

  • Reduce mLTV to ~85%

  • Strengthen oracle freshness guarantees

  • Add oracle redundancy if possible

Pool 141 — reUSD / USDC

Key Observations (Week 1 + week 2)

  • reUSD DEX liquidity (Avalanche): ~$1.4M

  • reUSD collateral deposited: ~$1.4M

  • Oracle-dependent valuation

Primary Risk Drivers

  • Oracle freshness dependency

  • Liquidity depth insufficient vs collateral

  • Stablecoin-style peg fragility risk

Failure Mode

Oracle lag + liquidity gap → liquidation slippage → bad debt risk.

Suggested Actions

  • Reduce mLTV to ~85%

  • Improve oracle update guarantees

  • Monitor peg deviation thresholds


Additional Week 2 notes

  • TVL drastically reduced since last week (-60.0% / -98.2% collateral/debt)
  • Highly inefficient capital allocation
  • USDC lenders risk drastically reduced

Pool 121 — savBTC / BTC.b

Key Observations

  • savBTC DEX liquidity: < $100K

  • savBTC collateral deposited: ~$1.7M

  • Custom oracle pricing

Primary Risk Drivers

  • Extremely low exit liquidity

  • Custom oracle trust assumptions

  • Depeg and death spiral risk profile

Failure Mode

Collateral cannot be liquidated at scale → liquidations fail → systemic bad debt.

Suggested Actions

  • Freeze market temporarily

  • Reopen only after:

    • liquidity depth improves materially

    • oracle robustness is validated

Pool 161 — PGOLD / PUSD

Key Observations

  • Chainlink oracle tracks XAU forex price

  • Collateral asset = PGOLD token

  • Oracle tracks reference asset, not token market price

Primary Risk Drivers

  • Oracle/reference mismatch risk

  • Peg trust assumption between PGOLD and XAU

  • Token-specific deviation risk not captured by oracle

Failure Mode

If PGOLD deviates from gold price while oracle tracks XAU, protocol may overvalue collateral → bad debt risk.

Suggested Actions

  • Validate peg mechanism transparency

  • Add token-specific pricing safeguards

  • Consider haircut or reduced mLTV

Pool 184 — hgETH / ETH

Key Observations

  • Vault-based asset used as collateral

  • Oracle relies on NAV valuation

  • NAV potentially manipulable depending on vault mechanics

Primary Risk Drivers

  • NAV manipulation risk

  • Oracle reliability concerns

  • Valuation attack surface

Failure Mode

Inflated NAV → overvalued collateral → under-liquidated positions → protocol bad debt.

Suggested Actions

  • Freeze market until valuation methodology is fully verified

  • Require hardened oracle design

  • Add conservative valuation buffers

Pool 158 and 172 — PT tokens 19/02/2026 expiry date

Key Observations

  • PT-sUSDai (19 Feb 2026) expired

  • PT-iUSD (19 Feb) expired

  • 3m USDC debt TVL across two expired markets -> Highly inefficient capital allocation

Suggested actions

  • Update pools ID: 158 and 172 with newest PT collateral
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