Collateral Silos

Collateral silos are isolated pools of assets used to back specific positions or markets within a decentralized protocol. Unlike a unified collateral pool where all assets share risk, silos ensure that the performance and security of one asset do not directly affect the others.

This partitioning prevents a price crash or exploit in one specific token from draining the entire protocol treasury. Silos are particularly important for supporting volatile or lower-liquidity assets that would otherwise introduce excessive risk to the system.

By restricting the scope of collateral, protocols can safely list a wider variety of assets for trading or borrowing. This design choice is a key component of modern DeFi risk management and protocol architecture.