# USDhl Architecture

USDhl is a fiat-backed stablecoin issued on Hyperliquid L1.  Every USDhl is backed 1:1 by M, a wholesale dollar collateralized by short‑term U.S. Treasuries. 

* **Transparency:** Reserve holdings are attested daily and streamed on‑chain (see [M0 Reserves Dashboard](https://dashboard.m0.org/)).
* **Convertibility:** M is always redeemable 1 : 1 for U.S. dollars through M0’s minter. It is also swappable 1:1 for USDC via a continually rebalanced single tick Uniswap pool [here](https://app.uniswap.org/explore/pools/ethereum/0x970A7749EcAA4394C8B2Bf5F2471F41FD6b79288).

#### Issuing USDhl: Lock & Issue

<figure><img src="https://19009743-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FtMFacMgYziBI8EeWuWGb%2Fuploads%2FspAnPAPpcg9UWsESuZRT%2FScreenshot%202025-06-09%20at%209.38.29%E2%80%AFPM.png?alt=media&#x26;token=8d645025-8f3f-42a3-8382-1ffa8d27d52c" alt=""><figcaption></figcaption></figure>

**Workflow:**

1. Acquire wrapped M: Swap USDC → wM via the deep 1 : 1 pool on Ethereum (Uniswap‑v3).
2. Lock M: Call `transferMLikeToken` on the Hyperlane Portal contract (Ethereum). The bridge locks the M and emits a Hyperlane message.
3. Issue USDhl: The Hyperliquid Hyperlane Portal verifies the message and mints the same amount of USDhl on HyperEVM.

#### Redeeming USDhl: Burn & Unlock

1. Burn: call `transferMLikeToken` on the Hyperlane Portal contract (HyperEVM side). USDhl is burned.
2. Unlock: the bridge verifies the burn and releases the locked wM back on Ethereum.
3. Cash Out: swap wM → USDC 1 : 1 or redeem wM with an AP for dollars.

#### M as a building block for USDhl

| Actor               | Action                                                                                       | Checkpoints                      |
| ------------------- | -------------------------------------------------------------------------------------------- | -------------------------------- |
| Minter              | Sends USD to SPV bank account                                                                | Bank receipt on‑chain            |
| SPV Operator        | Purchases T‑Bills / repo, updates custody ledger                                             | Custodian statement hash         |
| Validator (Auditor) | Verifies collateral market value ≥ outstanding M                                             | Signs message                    |
| Protocol            | Executes minting fucntion – issues M to minter                                               | On‑chain supply update           |
| Burn flow           | Minter returns M → protocol, receives burn request → SPV liquidates collateral and wires USD | Auditor signature + bank receipt |

M0 retains market‑makers (MMs) under standing agreements to mint/redeem on demand, ensuring tight arbitrage bands and deep liquidity in primary pools.

#### Maintaining the USDhl Peg

Similar to other fiat-backed stables, USDhl maintains a $1 market value because there is a constant economic incentive to arbitrage it back to $1. Workflows provided below:

If USDhl < $1:

1. Buy discounted USDhl on HyperCore / AMMs.
2. Burn USDhl via bridge; receive M 1 : 1 on Ethereum.
3. Swap M → USDC at par; pocket risk‑free profit.

If USDhl > $1:

1. Acquire M for USDC 1 : 1 on Ethereum.
2. Lock M → mint USDhl.
3. Sell newly minted USDhl above $1; capture premium.

Because both legs settle within minutes and carry no price risk on M, arbitrage keeps USDhl tightly anchored around $1.