Hylo USD (hyUSD) is a decentralized, crypto-backed stablecoin pegged to the U.S. dollar that operates on the Solana blockchain. It is designed to be overcollateralized by a basket of yield-bearing Solana Liquid Staking Tokens (LSTs) and is a core component of the Hylo protocol's dual-token system.

Overview

Hylo USD is the stablecoin issued by the Hylo protocol, a decentralized finance (DeFi) platform built to create what it terms "DeFi Native Money" on Solana. The protocol's primary function is to issue and manage hyUSD, which aims to maintain a stable 1:1 peg with the U.S. dollar without relying on traditional financial infrastructure, fiat collateral, or centralized custodians. The system is designed to be autonomous, permissionless, and self-contained, utilizing on-chain assets for its backing. ^{[1] [2]}

The stability of hyUSD is maintained through a symbiotic relationship with a secondary, volatile token called xSOL. Within the Hylo ecosystem, xSOL is engineered to absorb the price fluctuations of the underlying LST collateral pool. This mechanism is intended to insulate hyUSD from market volatility, ensuring its peg remains stable. In return for bearing this risk, xSOL holders receive leveraged exposure to the price of SOL. The protocol also features a yield-generation component through a Stability Pool, where users can stake hyUSD to earn rewards derived from the protocol's LST collateral and fees. ^{[3] [4]}

The project positions itself as a decentralized alternative to centralized stablecoins like USDC and USDT by eliminating custodial risk and potential censorship. Its design principles emphasize on-chain transparency, guaranteed liquidity through its internal mint and redeem functions, and financially incentivized risk management. The protocol has undergone security audits and provides a public risk dashboard to monitor its health in real-time. ^[5]

"We do not rely on real world assets for collateral, instead using LSTs as 'on chain bonds' to harness network yield." ^[1]

"Our protocol is autonomous and self-contained. Hylo has no fund manager, third party trading dependencies, or trust gaps." ^[1]

History

The Hylo protocol underwent a smart contract security audit conducted by the firm OtterSec in May 2025, a key step before its public-facing operations gained traction. ^[4] To incentivize user engagement and bootstrap liquidity, the project launched a points program in July 2025. This program was designed to reward users for various interactions with the protocol, such as holding xSOL or referring new users. ^[5]

On August 7, 2025, Hylo announced that it had successfully closed a $1.5 million seed funding round. The round was led by Robot Ventures, with participation from other notable investors including Colosseum, Solana Ventures, and YTWO Ventures. This funding was intended to support the continued development and expansion of the Hylo ecosystem on the Solana network. ^{[6] [2]} By August 12, 2025, the protocol had reportedly attracted over 2,800 active users and secured millions of dollars in total value locked (TVL). ^[4]

Technology

The Hylo protocol's architecture is centered around a dual-token system, a specific collateralization strategy, and interconnected products designed to maintain stability and provide utility for different risk appetites.

Dual-Token System

The core of Hylo's stability mechanism is the interaction between its two native tokens, hyUSD and xSOL, which are both issued from a single, shared collateral pool.

• hyUSD: The protocol's stablecoin, algorithmically pegged to $1 USD. Its primary function is to serve as a stable medium of exchange and store of value within the Solana DeFi ecosystem.
• xSOL: A volatile token that represents a tokenized, liquidation-free leveraged long position on SOL. Its main role within the protocol is to act as a financial buffer, absorbing the price volatility of the underlying SOL LST collateral to protect the hyUSD peg.

This symbiotic design ensures that as the value of the collateral pool fluctuates, the market capitalization of xSOL adjusts accordingly, while the value of hyUSD remains stable. ^[3]

Collateralization

hyUSD is fully backed and overcollateralized by a diversified basket of yield-bearing Solana Liquid Staking Tokens (LSTs). Users can mint hyUSD by depositing accepted collateral, such as USDC, USDT, SOL, or various LSTs, which the protocol then converts into a managed pool of LSTs. At one point in its operation, the collateral pool consisted entirely of JitoSOL. The protocol explicitly avoids the use of Real World Assets (RWAs), relying solely on on-chain crypto assets for its backing. The supported LSTs have included mSOL, jitoSOL, bSOL, and JupSOL. ^{[4] [5]}

Stability Mechanism

The protocol employs several mechanisms to maintain the hyUSD peg and ensure system solvency.

The Hylo Invariant

The relationship between the collateral and the two tokens is governed by a core mathematical principle, the Hylo Invariant. This equation dictates that the total value of the collateral pool must always equal the combined market capitalization of all circulating hyUSD and xSOL. Collateral TVL = (hyUSD Supply × hyUSD Price) + (xSOL Supply × xSOL Price) Since the price of hyUSD is fixed at $1 within the protocol, any change in the Collateral TVL directly impacts the price of xSOL. ^[3]

Pricing and Arbitrage

Hylo operates as an oracle-free system, meaning it does not rely on external price feeds to value its collateral or maintain its peg, which reduces the risk of price manipulation attacks. The protocol guarantees that hyUSD can always be minted or redeemed for $1 worth of collateral directly from the system with zero slippage. This internal mechanism creates a powerful arbitrage opportunity. If the price of hyUSD on an external exchange deviates from $1, arbitrageurs are incentivized to buy it cheaply and redeem it with the protocol for $1 of collateral, or mint it for $1 and sell it on the market for a premium, thereby pushing the price back toward its peg. ^[4]

Volatility Absorption

The price of xSOL is dynamically calculated based on the value remaining in the collateral pool after accounting for the backing of all circulating hyUSD. The formula is: xSOL Price = (Collateral TVL - hyUSD Supply) / xSOL Supply This design ensures that when the collateral value increases, the excess value accrues entirely to xSOL holders, amplifying their gains. Conversely, when the collateral value decreases, the loss is absorbed by the market cap of xSOL, shielding hyUSD holders from the downside. ^[3]

Key Products

The protocol offers three distinct products catering to different user needs.

• hyUSD: The primary stablecoin product for users seeking a decentralized, dollar-pegged asset.
• xSOL: The leveraged token for users who want to speculate on the price of SOL with no risk of liquidation, margin calls, or funding rates. Its effective leverage is dynamic and can be calculated as: Effective Leverage = Collateral TVL / xSOL Market Cap.
• Staked hyUSD (sHYUSD) and the Stability Pool: The Stability Pool is the protocol's primary yield-generation engine and a secondary insurance layer. Users can deposit their hyUSD into the pool to receive sHYUSD. In return, they earn yield generated from the staking rewards of the underlying LST collateral, protocol fees, and risk premiums. As of July 2025, the stated yield was approximately 18%. However, these deposits act as a backstop; in a severe market crash where the xSOL buffer is depleted, sHYUSD is programmatically converted into xSOL to recapitalize the system, exposing stakers to potential principal loss. ^{[5] [4]}

Tokenomics

As of November 15, 2025, Hylo USD (HYUSD) had a market capitalization of approximately $35.1 million and a circulating supply of around 35.1 million tokens. The token's 24-hour trading volume was approximately $1.18 million. The maximum supply of hyUSD is uncapped, as new tokens can be minted whenever users deposit sufficient collateral.

Key market data for hyUSD includes:

• All-Time High: $1.01 (November 3, 2025)
• All-Time Low: $0.9862 (October 10, 2025)
• Solana Contract Address: 5YMkXAYccHSGnHn9nob9xEvv6Pvka9DZWH7nTbotTu9E

Hylo USD is primarily traded on decentralized exchanges (DEXs) within the Solana ecosystem, with the most active trading pairs being against USDC on platforms such as Orca and Meteora. ^[7]

Risk Management and Security

The Hylo protocol has implemented several measures to manage risk and ensure security. The smart contracts were audited by OtterSec in May 2025. The protocol employs a dynamic Value-at-Risk (VaR) model to proactively manage systemic risk by adjusting parameters like leverage caps in response to market volatility. For transparency, Hylo provides a public-facing Risk Dashboard that displays real-time protocol health metrics, including the collateralization ratio and simulations of how severe price fluctuations in SOL would impact xSOL and sHYUSD positions. ^{[4] [5]}

Despite these measures, users face several risks:

• Smart Contract Risk: The inherent risk of bugs or vulnerabilities in the code that could be exploited.
• LST De-peg Risk: The protocol's stability is dependent on the underlying LSTs maintaining their peg to SOL. While a diversified basket mitigates this, a systemic failure could impact the protocol.
• Volatility Risk: xSOL holders are exposed to amplified losses if the price of SOL declines. sHYUSD holders risk having their stablecoin holdings converted into the volatile xSOL token during an extreme market downturn. ^[4]

Investors

Hylo is backed by several venture capital firms that participated in its $1.5 million seed round in August 2025. The lead investor was Robot Ventures. Other participating investors include Colosseum, Solana Ventures, and YTWO Ventures. ^{[2] [6]}