# Silo Operations

The Silo functions as the cornerstone in preserving the fiscal health and systemic stability of the Barn Protocol. This section provides an overview of its operational mechanisms, designed to neutralize debts from defaulted Sheds and reward active participants, known as Silo Contributors.<br>

**Deposit Mechanics: Silo Contributors**

Holders of LUCI tokens can opt to become Silo Contributors by transferring their tokens into the Silo. Generally, these deposits are accessible for withdrawal, unless they are earmarked for debt neutralization from defaulted Sheds. In such instances, withdrawals are temporarily suspended.

<figure><img src="https://2787681558-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FWQHokesx4twoLalR3b7N%2Fuploads%2FwURKZA56oh2rUsJEKkfO%2Fimage.png?alt=media&#x26;token=02065306-cda6-4624-b6e2-9fd8d714d661" alt=""><figcaption></figcaption></figure>

**Liquidation Process: Managing Under-Collateralized Sheds**

If a Shed defaults, an amount of LUCI equivalent to the Shed's debt is destroyed ('burned') from the Silo's liquidity pool. Simultaneously, the Silo receives the full collateral from the liquidated Shed. Since liquidations happen just below the set debt risk ratio, this usually results in a net asset gain for the Silo Contributors.

<figure><img src="https://2787681558-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FWQHokesx4twoLalR3b7N%2Fuploads%2FwUDFfhGbvyM86uezSh2Z%2Fimage.png?alt=media&#x26;token=9ae4bdad-e9ae-4484-93e4-d0b8e283251a" alt=""><figcaption></figcaption></figure>

**Collateral Gain Distribution: Proportional Allocations**

The share of collateral gains allocated to each Silo Contributor is computed based on their proportionate share of the total LUCI in the deposit pool at the time of liquidation.

<figure><img src="https://2787681558-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FWQHokesx4twoLalR3b7N%2Fuploads%2Fevs9HBM0AwJLcqJuSxIo%2Fimage.png?alt=media&#x26;token=30f70e3b-51b0-4af4-a881-aa8b893657ce" alt=""><figcaption></figcaption></figure>

**Withdrawal and Reallocation Options: Flexibility for Contributors**

Contributors can opt to withdraw either the entirety or a segment of their residual LUCI deposits. The system automatically disburses the full collateral gain to the contributor at the point of withdrawal. For those who are also borrowers within the Sheds, an option is available to allocate their collateral gains towards their own Sheds.

<figure><img src="https://2787681558-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FWQHokesx4twoLalR3b7N%2Fuploads%2FjBmisJu2TUxF7RwJU0fp%2Fimage.png?alt=media&#x26;token=c9f04834-1391-419d-b353-a7b593d618eb" alt=""><figcaption></figcaption></figure>


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