> For the complete documentation index, see [llms.txt](https://docs.keystonefi.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.keystonefi.xyz/how-it-works/whitepaper/hylo.md).

# Hylo comparison

Hylo is the closest Solana-native design to ksUSD, and the most useful one to reason against: it makes a claim on the same engine — Solana staking yield — and reaches a dollar by a different route. This page is the long form. The [whitepaper](/how-it-works/whitepaper.md#ix-position) carries the two-paragraph version.

## The design

Hylo overcollateralises hyUSD with a basket of LSTs and issues **xSOL**, a junior tranche that absorbs SOL's volatility so hyUSD can hold its peg. Its savings token then earns on the whole collateral pool, because xSOL holders and unstaked hyUSD holders forgo their share.

That is the structural difference in one line: **Hylo levers staking yield through an internal tranche; ksUSD hedges it with an external perp.** Both are claims on the same underlying return. The lasting difference is the leverage multiple and where the risk is parked, not the source.

## The rate is a participation ratio, not a spread

Hylo's savings rate is roughly the LST yield times pool value over staked supply. That has a specific consequence: **it is highest when fewest holders are staked, and it converges downward as the product succeeds.** The convergence target is the collateral ratio times the LST yield.

Hylo targets a 150% collateral ratio inside a 135–165% band. At roughly 7% LST yields that puts convergence at **9.5–10.5%**.

| Quarter | Observed  | Reading                               |
| ------- | --------- | ------------------------------------- |
| Q1 2026 | **52.4%** | Not a durable yield — see below       |
| Q2 2026 | **9.7%**  | Inside the predicted convergence band |

The 52.4% was not a yield in any durable sense. The stability pool had converted savings backing into xSOL during the drawdown, so the print is **xSOL recovering off its lows** — a leveraged-SOL result wearing a savings-rate label. Protocol TVL fell from $52M to $22.8M over the same quarter.

The compression happened, and it happened the way the mechanism predicts. It out-yields ksUSD today at 9.7% against 5.04% net, and that gap is real; it is also a gap that narrows as Hylo grows, by construction.

## V2: eHYUSD, and where the risk moved

In July 2026 sHYUSD became **eHYUSD**, marketed as fully delta-neutral. The way it reaches neutrality is the whole argument.

There is no external hedge. Hylo's documentation describes no perpetual and no off-chain derivative position. Neutrality is reached by selling collateral into USDC when the ratio falls, and *"every rebalance settles its profit or subsidy against the Earn Pool by minting or burning hyUSD"* — so *"subsidized rebalances under stress draw it down, the cost of de-risking the system."*

That is the same risk in a new place. The old design left the saver exposed once the tranche thinned. The new one **charges the saver the cost of de-risking as it happens**, in exactly the drawdowns the savings token exists to sit out. The spread schedule is fixed rather than a function of live market data, so the subsidy is not repriced when a fast market makes de-risking expensive.

## The honest comparison

ksUSD moves the same risk to the perp market, and that market can halt in the same drawdown. The difference worth defending is narrower than a pitch would make it:

* A **hedge counterparty can be replaced.** An internal rebalance charged to your own principal cannot, because it *is* the design.
* ksUSD has a **cash state** — it parks in USDC lending when the trade stops paying. Hylo has no equivalent.
* Once Hylo's coverage falls past 100%, the tranche is gone and **hyUSD carries SOL's volatility directly**. The holder who bought a dollar is left holding the exposure they bought it to avoid. That is a different instrument, not a bad quarter.

ksUSD can be hurt too. The difference is that the damage lands on the share price, marked at market: it degrades, it does not turn into something the holder never bought.

## Related

* [Whitepaper §IX — Position](/how-it-works/whitepaper.md)
* [Historical simulation](/how-it-works/strategy-and-modes/historical-simulation.md)