xASSETs

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: $$\text{xASSET Price} = \frac{\text{ASSET TVL} - \text{vUSD Supply}}{\text{xASSET Supply}}$$ 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.

Example: xSOL Price Adjustment

1. Initial Scenario

1 SOL worth $100 in the reserve. This backs 50 vUSD_SOL (worth $50). The remaining $50 is allocated to 50 xSOL tokens, each worth $1.

2. SOL Price Increases

SOL doubles to $200. The 50 vUSD_SOL still represent $50. This leaves $150 for xSOL. Each token’s value increases to $3, a 3x gain absorbing SOL’s positive movement.

3. SOL Price Drops

SOL falls to $75. The 50 vUSD_SOL still represent $50. This leaves $25 for xSOL. Each token drops to $0.50, absorbing the negative movement.This mechanism applies identically to xBTC/vUSD_BTC and any future asset pairs.

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Effective Leverage

Effective leverage reflects an xASSET token’s amplified exposure to its underlying asset at a point in time: $$\text{xASSET Leverage} = \frac{\text{ASSET TVL}}{\text{xASSET Market Cap}}$$ 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.

Example: xSOL Leverage Dynamics

1. Initial Scenario

1 SOL worth $100 in the reserve backs $50 of vUSD_SOL and $50 of xSOL. Effective leverage is 2x.

2. After vUSD_SOL Minting

An additional $50 of vUSD_SOL is minted (adding 0.5 SOL). Total reserve is $150, xSOL market cap remains $50. Effective leverage increases to 3x.

3. After vUSD_SOL Redemption

$25 of vUSD_SOL 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.

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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.

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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. See multi-asset-architecture for details on the borrow rate mechanism.

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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

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.