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xASSETs are Hylo’s liquidation-resistant leverage tokens. Each xASSET absorbs the full price exposure of its underlying collateral pool, allowing the paired vUSD to maintain its $1 peg. By holding an xASSET, you get amplified exposure with the protocol handling all mechanics automatically.

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Pricing

The price of any xASSET is calculated from the variable reserve, the excess value not backing the virtual stablecoin: xASSET Price=ASSET TVL−vUSD SupplyxASSET Supply\text{xASSET Price} = \frac{\text{ASSET TVL} - \text{vUSD Supply}}{\text{xASSET Supply}} As the underlying asset appreciates, the xASSET price increases with effective leverage. If the asset price drops, the xASSET absorbs the loss, maintaining the vUSD peg.
  1. Initial Scenario
1 SOL worth $100 in the reserve. This backs 50 vUSDSOL (worth $50). The remaining $50 is allocated to 50 xSOL tokens, each worth $1.
  1. SOL Price Increases
SOL doubles to $200. The 50 vUSDSOL still represent $50. This leaves $150 for xSOL. Each token’s value increases to $3, a 3x gain absorbing SOL’s positive movement.
  1. SOL Price Drops
SOL falls to $75. The 50 vUSDSOL still represent $50. This leaves $25 for xSOL. Each token drops to $0.50, absorbing the negative movement.This mechanism applies identically to xBTC/vUSDBTC and any future asset pairs.
Collateral Volatility Absorption Schema

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Effective Leverage

Effective leverage reflects an xASSET token’s amplified exposure to its underlying asset at a point in time: xASSET Leverage=ASSET TVLxASSET Market Cap\text{xASSET Leverage} = \frac{\text{ASSET TVL}}{\text{xASSET Market Cap}} Leverage fluctuates dynamically with protocol activity:
  • Increases when vUSD is minted or xASSET is redeemed
  • Decreases when vUSD is burned or xASSET is minted
Each xASSET-vUSD pair targets a collateral ratio of 150%, implying structural leverage at 3x in normal conditions. As leverage diverges from the target, the protocol uses dynamic routing and collateral rebalancing to guide it back.
  1. Initial Scenario
1 SOL worth $100 in the reserve backs $50 of vUSDSOL and $50 of xSOL. Effective leverage is 2x.
  1. After vUSDSOL Minting
An additional $50 of vUSDSOL is minted (adding 0.5 SOL). Total reserve is $150, xSOL market cap remains $50. Effective leverage increases to 3x.
  1. After vUSDSOL Redemption
$25 of vUSDSOL is redeemed. Total reserve decreases to $75, xSOL market cap still $50. Effective leverage reduces to 1.5x.The same dynamics apply to xBTC and any future xASSET tokens.
Effective Leverage vs Fraction of TVL in xASSET

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xSOL: Free Leverage

xSOL benefits from the SOL pool’s staking yield. Since LSTs generate native staking rewards, this yield flows to the protocol and no cost is charged to xSOL holders. Leverage is effectively free from ongoing costs besides the forfeited yield. The one exception is a high collateral ratio. Above 165% CR, the protocol harvests a multiple of the LST yield, and xSOL holders pay the amount above 1×. See the borrow rate curve.

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xBTC: Borrow Rate Leverage

BTC doesn’t generate native yield. As such the protocol exacts a configurable borrow rate on the BTC pool, paid by xBTC holders through gradual NAV reduction. The charge is based on the xBTC market cap, so the effective rate on leveraged exposure rises as leverage falls. The rate also follows the pool’s CR. It stays at the base rate in the Neutral zone, rises linearly above 165% CR to a capped 2× the base rate at 175% CR, and pauses below 135% CR. See the borrow rate curve for details.

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Fee Structure

xASSET minting and redemption are each subject to a flat, configurable fee per pool. In extreme market conditions, fees may be temporarily adjusted for risk management purposes to incentivize healthy protocol behavior. See risk-management for details.

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Risk: Volatility Decay

Volatility decay causes leveraged tokens to lose value over time in sideways markets. When holding an xASSET through multiple rebalancing cycles, the break-even price of a user’s position may increase.
xASSET value is path-dependent. Large price swings in both directions erode value because leverage amplifies both gains and losses. Example:
  1. SOL is at $100, xSOL is at $100 with 2x leverage
  2. SOL drops 20% to $80; xSOL drops 40% to $60
  3. SOL recovers back to $100, but xSOL only recovers to $90, not $100
SOL returned to its starting price, yet xSOL lost $10. This is volatility decay: each rebalancing cycle chips away at the token’s value, even if the underlying asset ends up where it started.