Silo sFXS Gauge


Add sETH-FXS gauge to the gauge controller.

Background and Motivation

Silo is a decentralized and permissionless lending protocol that allows for the creation of risk-isolated markets. Every lending market (or ‘silo’) consists of a base Token and the Bridge Asset (ETH) only, which means an exploit in one silo will not affect any other silos. We have a good standing with the Frax team with Sam as our advisor and our decision to pair our token $SILO with FRAX on Curve.

Silo currently has 10 markets, including FXS-ETH and FRAX-ETH. Depositors can borrow ETH with FXS or FRAX. Our team recognizes that there is an appetite for deep lend/borrow markets for FXS and as such are requesting a gauge. The FXS-ETH and FRAX-ETH silos have been seeded with 50 ETH each from SiloDAO’s Treasury.

As far as building a deep money market for the FXS-ETH silo, there are two parties that could be incentivized:

1- Incentivizing sFXS (FXS deposits in the FXS-ETH silo) would likely drive FXS deposits, increasing FXS TVL and encouraging ETH depositors to borrow FXS against their ETH collateral.

2- Incentivizing sETH-FXS (ETH deposits in the FXS-ETH silo) would likely drive ETH deposits, deepening the FXS market and allowing for larger borrowing activities.

sETH-FXS gauge

The goal of having the gauge is to build a deep borrow/lend market for FXS. The sETH-FXS is currently seeded with 50 ETH liquidity from the DAO’s treasury with plans to direct more ETH to markets with large deposits and borrowing activities.

Whilst an sFXS gauge will create deep FXS liquidity in the FXS-ETH silo, it does not directly encourage ETH depositors to borrow. To drive large ETH deposits, we recommend the gauge Incentivize ETH deposits as well to allow for robust ETH liquidity for FXS holders to borrow against from the outset.

Dev Docs

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The goal of the gauges is to stimulate the usage of FRAX, not FXS, so it would be better to ask for a sFRAX gauge. We currently have an aFRAX gauge for FRAX deposits in Aave which is quite successful.
A gauge for sFRAX will increase FRAX deposits and allow users to borrow FRAX to long ETH. Since longing ETH is the most common action on lending markets, the deposited FRAX will likely be borrowed, so it will not sit idle and will thus increase the usage of FRAX.