What is Hylo?
Hylo is a comprehensive decentralized finance suite built natively on the Solana blockchain, offering an innovative approach to stablecoins and leveraged trading. The protocol introduces a dual-token system consisting of hyUSD, a decentralized stablecoin backed entirely by liquid staking tokens (LSTs), and xSOL, a leveraged token providing 2-4x exposure to SOL without liquidation risk or funding fees. Launched in private beta in June 2025, Hylo has rapidly grown to over $100 million in total value locked by October 2025, establishing itself as one of Solana's fastest-growing DeFi protocols.
The platform addresses critical pain points in decentralized finance by eliminating reliance on real-world assets and centralized stablecoins like USDC. Instead, Hylo uses a basket of liquid staking tokens (primarily JitoSOL) as collateral, effectively transforming LST staking rewards into a decentralized "bond" market. This architecture ensures complete permissionless operation with no fund managers, third-party trading dependencies, or trust gaps. The protocol has been audited by OtterSec, one of Solana's most respected security firms, and is backed by notable investors including Robot Ventures, Colosseum, and Solana Ventures with $1.5 million in funding.
What sets Hylo apart is its mathematically elegant solution to maintaining stability and leverage simultaneously. The entire protocol operates on a single invariant equation where the collateral TVL equals the combined market capitalizations of hyUSD and xSOL. This symbiotic relationship allows xSOL to absorb all SOL price volatility, keeping hyUSD stable at $1 while providing leveraged exposure to SOL holders.
Key Features
- hyUSD Stablecoin: A fully decentralized stablecoin maintaining a 1:1 peg with the US dollar, backed entirely by liquid staking tokens. Unlike algorithmic stablecoins that rely on external mechanisms, hyUSD achieves stability through its symbiotic relationship with xSOL, which absorbs all price volatility from the shared collateral pool.
- xSOL Leveraged Token: Provides 2-4x leveraged exposure to SOL with zero liquidation risk and no funding fees. The token can be held in any wallet and automatically adjusts its leverage based on protocol dynamics, offering a stress-free alternative to perpetual contracts and margin trading.
- sHYUSD Yield-Bearing Token: Users can stake hyUSD into the stability pool to receive sHYUSD, which accrues amplified yields of approximately 17-21% APY. This yield comes from multiple sources including LST staking rewards, protocol fees, and risk premiums for backstopping the protocol during market stress.
- hyloSOL Liquid Staking: Hylo's native liquid staking token offering 7-10% APY with minimal fees. SOL deposited into hyloSOL is staked exclusively to Hylo's institutional-grade validator operated in partnership with Sentinel and Phase Labs, ensuring maximum performance and reliability.
- Dynamic Risk Management: The protocol employs a sophisticated two-tier stability system that activates at different collateral ratio thresholds (150% and 130%). Fee adjustments financially incentivize actions that improve protocol health, while the stability pool provides automatic intervention during severe market volatility.
- Zero Liquidation Risk: Unlike traditional leverage products, xSOL holders never face liquidation. The token's value adjusts automatically with SOL price movements, allowing users to maintain leveraged positions through extreme market conditions without losing their principal.
- Permissionless Architecture: The entire protocol operates autonomously through immutable smart contracts with no KYC requirements, administrators, or centralized control. All program addresses are publicly verifiable, ensuring complete transparency and community accountability.
- LST-Backed Reserves: The collateral pool consists entirely of liquid staking tokens that continuously earn 8-11% base APY from Solana network staking rewards. This native yield generation supports the protocol's revenue model and provides sustainable returns to participants.
How It Works
Hylo operates on a elegantly simple mathematical principle expressed in its invariant equation: Collateral TVL = (hyUSD Supply × $1) + (xSOL Supply × xSOL Price). This equation ensures that the total value of both tokens always equals the collateral locked in the protocol. When users deposit assets like USDC, USDT, or SOL, these are automatically converted into liquid staking tokens (primarily JitoSOL) that form the backing reserves.
The symbiotic relationship between hyUSD and xSOL is the protocol's core innovation. When SOL's price increases, the variable reserve (collateral not needed to back hyUSD) grows in value, causing xSOL's price to rise with effective leverage. Conversely, when SOL's price drops, xSOL absorbs the volatility by decreasing in value, allowing hyUSD to maintain its $1 peg. Users can mint either token by depositing collateral or redeem them back to the underlying LSTs at any time, with the protocol automatically calculating prices based on the current state of the collateral pool.
The stability pool mechanism provides an additional layer of security. When the collateral ratio falls below critical thresholds, the protocol activates fee adjustments to incentivize stabilizing actions. If the situation becomes severe (CR below 130%), staked hyUSD in the stability pool is automatically converted to xSOL, burning hyUSD supply and increasing xSOL supply to restore healthy collateralization. This automated intervention proved robust during the November 2025 "Black Friday" flash crash, where xSOL holders maintained their positions without liquidations while traditional leverage platforms saw massive liquidation cascades.
Supported Networks
Hylo operates exclusively on Solana, leveraging the blockchain's high throughput, low transaction fees, and parallel processing capabilities through the Sealevel runtime. The protocol is designed to compose seamlessly with other Solana DeFi primitives including Jito, Marinade, Jupiter, and Kamino Finance. Hylo also has integrated liquidity pools on Kamino offering additional yield opportunities for liquidity providers.
Fees and Costs
Minting Fees: 1% fee on minting both hyUSD and xSOL during normal protocol operations (CR above 150%). Fees adjust dynamically based on protocol health, decreasing to incentivize beneficial actions and increasing to discourage harmful ones when collateral ratios decline.
Redemption Fees: 1% fee on redeeming both tokens back to underlying collateral during normal operations. Like minting fees, these adjust dynamically with redemption fees decreasing when the protocol needs to encourage hyUSD burns or discourage xSOL burns.
No Ongoing Costs: Unlike perpetual contracts or traditional leverage products, xSOL has no funding rates, interest accrual, or maintenance fees. Once minted, users can hold the token indefinitely without additional costs eating into profits.
Solana Gas Fees: Standard Solana transaction fees apply, which are typically fractions of a cent per transaction, making Hylo one of the most cost-effective leverage solutions in DeFi.
Stability Pool Fees: No additional fees for staking hyUSD into the stability pool to earn sHYUSD. Users simply receive the yield-bearing token and begin accruing amplified returns immediately.
Security and Audits
Hylo completed a comprehensive security audit by OtterSec in May 2025, one of the most respected security firms in the Solana ecosystem trusted by the Solana Foundation, Sui, and Backpack. The audit examined the protocol's smart contracts for vulnerabilities and verified the mathematical soundness of its stability mechanisms. All protocol code operates through immutable smart contracts deployed on Solana, with program addresses publicly verifiable for community accountability.
The protocol's security model relies on financially incentivized risk management rather than external dependencies. The two-tier stability system with automatic fee adjustments and stability pool interventions creates robust defenses against market volatility. During the November 2025 Black Friday flash crash, Hylo successfully weathered one of the most severe stress tests any leverage platform has faced, with the protocol maintaining stability while traditional platforms experienced massive liquidation events.
While the audit adds significant confidence, users should understand that all smart contracts carry inherent risks. The protocol's code is immutable, which prevents malicious changes but also means bugs cannot be easily patched. However, the relatively simple mathematical model and autonomous operation reduce attack surfaces compared to more complex DeFi protocols.
Use Cases
Leveraged SOL Exposure: Traders bullish on Solana can use xSOL to gain 2-4x leveraged exposure without the stress of monitoring liquidation prices or paying ongoing funding fees. This makes it ideal for long-term holders who want amplified gains without the maintenance requirements of perpetual contracts.
Stable Yield Generation: Risk-averse users can mint hyUSD and stake it for sHYUSD to earn 17-21% APY in a delta-neutral position. This provides significantly higher yields than traditional savings while maintaining stable value in most market conditions, making it attractive for users seeking consistent returns.
Liquid Staking Alternative: Users wanting straightforward SOL staking rewards can use hyloSOL to earn 7-10% APY with minimal fees while maintaining liquidity. The token can be used throughout Solana DeFi while continuously accruing staking rewards.
Arbitrage Opportunities: As hyUSD gains adoption as a trading pair across Solana DEXs, arbitrageurs can profit from price discrepancies between hyUSD and its $1 peg, while also benefiting from dynamic fee adjustments during protocol rebalancing events.
DeFi Composability: Both hyUSD and xSOL can be used as collateral or liquidity in other Solana DeFi protocols, allowing users to build complex strategies. For example, providing liquidity in the hyUSD-JitoSOL pool on Kamino earns trading fees, JTO token incentives, and Hylo XP points simultaneously.
Risks to Consider
Smart contract risk remains the primary concern despite the OtterSec audit. While audits significantly reduce vulnerability risks, they cannot guarantee complete security. Bugs or exploits in the protocol's immutable smart contracts could result in loss of funds. Additionally, as a relatively new protocol launched in 2025, Hylo's economic model has not been stress-tested across multiple market cycles and extreme scenarios beyond the November 2025 flash crash.
The protocol's deep dependency on external LST protocols like Jito and Marinade creates systemic risk. If any LST in the collateral pool experiences a de-pegging event, security breach, or validator issues, it directly impacts Hylo's solvency and could affect both hyUSD's stability and xSOL's value. This nested reliance means users are exposed not only to Hylo's risks but also to the risks of underlying LST protocols.
Market risks include the volatility inherent in xSOL positions and the potential for sHYUSD to become volatile during stability pool activations. While xSOL eliminates liquidation risk, holders still experience amplified losses when SOL's price declines. Stability pool participants accepting 17-21% yields must understand they're providing insurance to the protocol—during severe crashes, their staked hyUSD may be converted to xSOL at potentially unfavorable prices, exposing them to temporary losses until the market recovers. The protocol is also in private beta with relatively low adoption compared to established DeFi protocols, which could impact liquidity and lead to larger slippage on trades.
