"I want to grow my assets with DeFi, but it's complicated and I'm scared of the risks..." "Stablecoins are convenient, but they don't grow just by holding them..." "Leverage trading is exhausting due to forced liquidations and fees..."

If you've ever felt this way, Hylo, a new DeFi project emerging from the Solana blockchain, might be the long-awaited solution you've been looking for.

Hylo's goal is to unite two elements that have always been difficult to reconcile—"stable assets (dollars)" and "aggressive investing (leverage)"—within a single, sophisticated system.

In this article, we will explain in the clearest way possible the innovative mechanics of Hylo, which has the potential to overturn the conventional wisdom of DeFi, the concrete benefits it offers to us users, and the exciting possibility of an airdrop.

Let's dive deeper, starting with the "pain points" in DeFi that Hylo aims to solve.

The world of DeFi has always pursued "stability" and "growth," but it has consistently run into a major wall.

Problem 1: The Stablecoin "Trilemma"

Stablecoins have three ideal elements: "decentralization (not dependent on a specific company)," "price stability," and "capital efficiency (how effectively money can be used)." However, achieving all three simultaneously has been a formidable challenge.

• Bank-like Stable Types (e.g., USDC): Stable because they are backed by dollars, but they lack "decentralization" as they are managed by an issuing company, and they also carry the risk of being frozen.
• Crypto-backed Decentralized Types (e.g., DAI): Decentralized, but they require a large amount of collateral (over-collateralization) to prepare for price volatility. The problem is that this leads to poor "capital efficiency" as money is excessively locked up.
• Algorithm-based Experimental Types (e.g., the former UST): They pursued an ideal, but their fragile mechanisms led to a "death spiral," a chain reaction of price collapses.

Problem 2: Leverage Trading is Full of "Pitfalls"

Leverage trading allows for aiming for large returns with a small amount of capital. However, great risks always lurk behind it.

• Forced Liquidation (Stop-Loss): The nightmare of having your position forcibly closed due to a slight, sudden price drop, resulting in the loss of your assets.
• Fee Hell (Funding Rates): The need to continuously pay fees to maintain a position, making it unsuitable for long-term holding.
• The Mystery of Value Decay (Volatility Decay): Traditional leverage tokens suffer from a structural flaw where their value gradually erodes simply from the price of the underlying asset moving up and down.

Hylo seeks to tackle these deep-rooted problems head-on with the power of Solana and its unique "dual-token" design.

Hylo's innovation lies in the "symbiotic relationship" where its two assets, the stablecoin hyUSD and the leverage token xSOL, support each other.

To bring this to life, Hylo chose Solana. This is because Solana's "overwhelming transaction speed," "dirt-cheap transaction fees," and vibrant LST ecosystem are essential for the stable operation of Hylo's complex and precise financial system.

Hylo uses these LSTs, which are essentially "interest-bearing SOL vouchers," as common collateral to create two magical coins.

① hyUSD: Does It Grow Just by Holding? The "Interest-Bearing Dollar"

hyUSD is the pursuit of the ideal stablecoin, a true "Better Internet Money."

How it works: Users deposit LSTs, which have the characteristic of appreciating in value, into Hylo and use them as collateral to issue hyUSD.

What's so great about it! The collateral, LSTs, continue to generate staking rewards while they are deposited. Hylo is designing a mechanism to distribute a portion of this generated profit back to hyUSD holders.

In other words, just like earning interest by depositing money in a bank, hyUSD has the potential for your assets to grow just by holding it in your wallet. This is a groundbreaking approach that solves the capital efficiency problem of traditional stablecoins, where money just sits idle.

② xSOL: Leverage Freed from the "Nightmare of Liquidation"

xSOL is a dream-like leverage token for investors who want to bet on the long-term appreciation of SOL.

How it works: xSOL is designed to have a price movement that is leveraged against the price of SOL.

What's so great about it! xSOL is completely free of the "forced liquidations," "margin," and "funding rates" that have long plagued traders.

How is that possible? This is because xSOL is not a "debt-based" leverage, where you borrow money from someone to hold a position. The entire Hylo system shares risk, and leverage is managed based on the protocol's balance sheet, so there is no need for individual positions to be forcibly liquidated.

Furthermore, because it does not rebalance daily, it also avoids the problem of "volatility decay," where value erodes due to price fluctuations.

As a result, xSOL offers a new, previously unavailable value proposition: a simple, low-cost, and safe way to hold long-term leverage on SOL, betting on its future potential.

Hylo's innovation becomes clearer when compared to existing financial products.

For such an attractive project, many are surely wondering, "How can I participate?" and "Will there be an airdrop?"

The Benefits for You

• For Stability-Oriented Investors (hyUSD): A new option to safely grow assets while maintaining decentralization.
• For Aggressive Investors (xSOL): The ability to execute a long-term leverage strategy on SOL at low cost, without worrying about liquidation.

Risks You Absolutely Must Know

Hylo is still in the early stages of development (closed testnet) and, along with its great potential, carries unknown risks.

1. Smart Contract Risk: The possibility of losing funds due to bugs in the code.
2. Oracle Risk: The possibility of malfunction in the external price feeds the protocol relies on.
3. LST De-Peg Risk: The risk that the price of the LST collateral could collapse.
4. Early-Stage Nature: The fact that information such as security audits has not yet been released is currently the biggest risk factor.

Airdrop Outlook

Many media outlets are highlighting Hylo as a promising airdrop candidate. The fact that it is currently in a closed test phase with only a very small number of users participating means there is a chance to contribute at a very early stage.

However, this is not about getting "free tokens." Participation at this stage is a "valuable contribution activity" that involves testing an unaudited, unknown protocol and providing feedback. A future airdrop should be considered a "just reward" for these early contributors who took on that risk.

When the testnet opens to the public in the future, participating in it will likely be the most certain path to becoming eligible for an airdrop. When you do participate, it is strongly recommended that you fully understand the risks mentioned above and act cautiously with surplus funds that you can afford to lose.

The story of the "Better Internet Money" that Hylo is creating has only just begun. Why not join this grand challenge as an early contributor?