Hydration

A next-gen DeFi protocol w/ cross-chain swaps, borrowing, stablecoin, staking...

Hydration is Polkadot’s DeFi appchain that unifies swaps (Omnipool), lending/borrowing (Aave-v3–style money market), and HOLLAR, an over-collateralized stablecoin—plus a cross-chain swap UX that abstracts XCM under the hood. This guide distills how Hydration works, when to use each product, and how to execute a remote swap from DOT to USDT on Asset Hub in a few steps.

Why Hydration matters now

Polkadot’s modular architecture puts assets across Asset Hub and many parachains. Hydration simplifies this by concentrating liquidity in the Omnipool, providing a money market, and introducing HOLLAR for a native, over-collateralized unit of account—all on a single DeFi appchain that leverages XCM for cross-chain settlement. For users and DAOs, that means fewer tabs, fewer bridges, and fewer foot-guns.

Context (Sept 2025): Hydration evolved from HydraDX, rebranding as the network expanded from trading into lending and a native stablecoin.

ELI5: Hydration in one minute

One appchain, three pillars: Trade in one big pool, borrow/lend like Aave v3, mint/use HOLLAR against crypto collateral.
Liquidity lives together: The Omnipool holds many assets in a single pool so routes are shorter and slippage is reduced.
Cross-chain without the pain: “Remote swaps” package XCM steps so you can end with the asset where you want it (e.g., USDT on Asset Hub) in one flow.

How Hydration works

1) Omnipool trading

The Hydration Omnipool is a novel AMM concentrating multi-asset liquidity in one pool. Instead of hopping pool-to-pool, most trades route internally, improving capital efficiency and depth. Mathematical specs and risk controls (caps, fees, circuit breakers) underpin the design.

Who benefits

Traders: Tighter pricing on long-tail pairs via single-pool routing.
Projects/DAOs: One venue to deepen liquidity and set DAO-approved listings via on-chain governance.

2) Lending & borrowing

Hydration runs a fork of Aave v3 to supply assets, earn yield, and borrow against collateral. This integrates naturally with trading and HOLLAR use cases (e.g., mint stablecoin, hedge, or lever up).

3) HOLLAR stablecoin

HOLLAR is Hydration’s over-collateralized stablecoin targeting ≈$1, minted against crypto collateral. It is not algorithmic; every HOLLAR is backed by deposited assets in the system, with risk parameters and liquidations as guardrails.

4) Cross-chain swaps (“remote swaps”)

Hydration’s developer docs describe remote swaps that compose XCM instructions so a user can, for example, swap DOT on the Relay Chain into USDT on Asset Hub in one UX flow. The app crafts the needed XCM under the hood, handling reserve locations and final destinations.

Hydration App on Polkadot: Key features at a glance

Unified DeFi appchain: trading, lending, and a native stablecoin on Polkadot.
Single-pool liquidity model (Omnipool): efficient routing, fewer hops, governance-gated listings.
Aave-v3–style money market: supply/borrow with risk tooling derived from a proven framework.
Over-collateralized stablecoin (HOLLAR): crypto-backed, protocol-native, and designed for composable use in swaps, lending, or treasuries.
Cross-chain UX: package XCM so users end with the asset on the right chain (e.g., Asset Hub).

Feature comparison table

Product/Tool	Purpose	Where it runs	Liquidity/Backing	Notable mechanics	Typical users
Omnipool (Trading)	Spot swaps across many assets	Hydration appchain	Multi-asset single pool	Single-hop routing, risk caps, circuit breakers	Traders, DAOs seeding POL
Lending/Borrowing	Supply assets, earn APR, borrow	Hydration appchain	Pooled lenders’ assets	Aave v3-style risk params, interest rate curves	Yield seekers, hedgers
HOLLAR	Over-collateralized stablecoin (~$1)	Hydration appchain	Crypto collateral vaults	Liquidations, collateral ratios	Treasuries, traders, LPs
Remote swaps	Cross-chain swap + deliver	Hydration UI via XCM	App routes to end chain	XCM composition by reserve/destination	End-users, wallets

(Details sourced from Hydration docs.)

HDX Token: The Governance Engine of Hydration DAO

HDX is Hydration’s native governance and incentive token: holding HDX grants you voting power in the Hydration DAO, which decides on protocol changes—including whether a project’s asset is listed in the Omnipool via public referenda of HDX holders. Beyond governance, HDX helps align behavior across the appchain by redistributing protocol revenue to participants who take beneficial actions (e.g., liquidity provision or other DAO-defined activities), reinforcing sustainable liquidity and risk management. Historically, HDX distribution included an LBP phase with xHDX claims, and the token has continued to anchor the project’s evolution from HydraDX to Hydration under on-chain mandates.

Mini-guide: DOT → USDT on Asset Hub via Hydration

Goal: End with USDT on Asset Hub starting from DOT.

Connect wallet to Hydration App (e.g., Talisman/Polkadot.js/Nova).
Choose source asset & origin: DOT (Relay Chain).
Choose destination asset & chain: USDT (Asset Hub).
Review route & fees: The UI composes a remote swap that trades DOT and delivers USDT to Asset Hub in one flow.
Sign once: Approve the batched XCM.
Verify settlement on Asset Hub (explorer/wallet).

Tip: If you’re moving from CEX → Asset Hub → Hydration, you can also use the Cross-Chain page in Hydration’s app and supported wallets (e.g., Talisman, Nova).

Practical example: Treasury DCA & liquidity routing

Public proposals have described using Hydration’s rolling DCA to diversify the Polkadot Treasury into tBTC, and then deploying liquidity back into the Omnipool to support ecosystem pairs. The workflow shows how treasuries can combine DCA, Omnipool LP, and cross-chain settlement in practice.

Common pitfalls & pro tips

Reserve location matters: XCM behavior depends on where an asset’s reserve lives (Relay Chain, Asset Hub, or a parachain). Hydration’s remote swaps handle this, but advanced users should still understand reserve chains to predict fees/weights.
DAO listings ≠ automatic: Tokens list in the Omnipool only after Hydration DAO approval through referenda—even if criteria are met. Plan lead time for governance.
Stablecoin is collateralized: HOLLAR is not algorithmic; treat it like a Maker-style crypto-backed stablecoin with collateral/liq. limits. Watch health factors when borrowing.
Money-market risks: Aave v3-derived designs are battle-tested but not risk-free. Monitor interest rate spikes, collateral factors, and liquidation thresholds.
Cross-chain fees & confirmations: Remote swaps abstract XCM, but you still incur execution fees and should verify final balances on the destination chain.

FAQs

1) What’s the simplest mental model for Hydration? A DeFi hub on Polkadot that merges trading, lending, and a stablecoin under one chain and UI.

2) How is the Omnipool different from standard DEX pools? It’s a single multi-asset pool (not fragmented pairs), so most routes are internal, improving efficiency and depth.

3) Is HOLLAR algorithmic? No. It is over-collateralized and minted against crypto collateral with liquidations.

4) What powers Hydration’s lending? A fork of Aave v3 with risk parameters and interest rate models suited to Hydration’s asset set.

5) Can I end a swap on Asset Hub or another parachain? Yes. The remote swap flow composes XCM so you receive the asset on the destination chain (e.g., USDT on Asset Hub).

6) Who decides which tokens list in the Omnipool? Hydration DAO via on-chain referenda of HDX holders; listings can be declined even if guidelines are met.

7) Where does Asset Hub fit in? Asset Hub is Polkadot’s system chain for issuing/holding assets and is a common landing zone for stablecoins like USDT in cross-chain flows.

8) Is this investment advice? No. This is educational information about protocol mechanics and UX.

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Strategies: GDOT (GIGADOT) & GETH (GIGAETH)

Quick primer. GDOT and GETH are Hydration “strategy tokens” that bundle multiple yield sources into a single asset while keeping exposure to DOT and ETH, respectively.

GDOT blends: DOT staking yield via vDOT, lending yield via aDOT, plus liquidity/trading incentives available on Hydration. It can also be used as collateral in Hydration Borrow.
GETH blends: ETH staking yield via wstETH, lending yield via aETH, and fees/incentives from the wstETH–aETH pool; it’s designed to be collateralizable and LP-able on Hydration.

Core plays (for power users & treasuries)

Hold for composite yield. Simply holding GDOT/GETH accrues the packaged yields from their underlying components—no active juggling across staking, lending, and LPs.
Use as collateral; borrow stable liquidity. Post GDOT/GETH as collateral in Hydration Borrow to draw HOLLAR (or other supported assets), funding operations or strategies without selling your DOT/ETH exposure. Monitor health factor and liquidation thresholds.
LP & farm when incentives are attractive. Supply GDOT/GETH liquidity (single-sided via Omnipool or configured pools) to capture trading fees and programmatic incentives when active.
Route cross-chain outcomes. After borrowing or swapping, use Hydration’s remote-swap UX to deliver assets (e.g., USDT) to Asset Hub or another parachain—reducing manual XCM steps.

Three practical strategy templates

1) “Set-and-sip” yield stack (no leverage)

Acquire GDOT (for DOT exposure) or GETH (for ETH exposure).
Hold to auto-accrue the blended staking + lending + LP incentives; optionally allocate a small slice to LPs when APRs are attractive.
Rebalance quarterly; treat as a consolidated yield sleeve in a Polkadot treasury.

2) Collateralized HOLLAR runway (conservative)

Deposit GDOT or GETH as collateral in Hydration Borrow.
Borrow HOLLAR against it to cover operating spend, market-making quotes, or controlled DCA into target assets.
Keep HF ≥ 1.8–2.0 (illustrative) and set alerts; repay with operating flows or periodic swaps.

3) Yield-compounding loop (advanced, risk-on)

For DOT: loop with vDOT exposure inside GDOT—post GDOT as collateral, borrow DOT/HOLLAR, re-enter GDOT or vDOT until marginal APR ≈ borrow cost + risk premium.
For ETH: similar loop using GETH collateral; note GETH’s stack (wstETH + aETH + pool fees) and watch pool peg dynamics.
This accelerates APY but tightens liquidation bands; model adverse moves and peg slippage before sizing.

Implementation notes & checkpoints

Whitelists/params. Confirm GDOT/GETH are enabled as collateral and check current LTVs, liquidation thresholds, and borrow APRs in-app before executing.
ETH stack specifics. The wstETH–aETH stableswap and aETH interest leg are integral to GETH’s blend; governance referenda configured these components (including peg update bounds) when enabling GIGAETH and related pools.
Incentive windows. Hydration has run GIGAHydration campaigns (e.g., extra GDOT farms) that temporarily boost returns—use, but don’t overfit your strategy to expiring boosts.

Risk & ops checklist (read before sizing)

Composite risk. GDOT/GETH inherit risk from all legs (staking derivatives, lending markets, LP pools) and smart-contract/governance changes. Size accordingly.
Collateral health. Borrowing against strategy tokens compounds volatility; keep buffers, set alerts, and understand health factor math.
Peg/path dependencies. GETH relies on wstETH–aETH mechanics; extreme market conditions can widen spreads or impact rebalance costs. Governance parameters (e.g., max peg update) exist but do not eliminate basis risk.
Incentive decay. Boost programs (e.g., GDOT farms) are transient; ensure your base carry still clears funding costs post-incentives.

Heads-up: Nothing here is investment advice. Treat GDOT/GETH as tools to package multiple yield streams; model worst-case scenarios (rate spikes, collateral haircuts, peg moves) before deploying treasury-scale capital.

Conclusion

Hydration collapses DeFi complexity on Polkadot into one coherent hub: Omnipool for depth and routing, lending for capital efficiency, HOLLAR for a native, collateralized unit of account, and remote swaps to put the right asset on the right chain. For power users, treasuries, and DAOs, it’s a pragmatic way to trade, route, borrow, and settle across Polkadot with fewer steps.