While commonly thought of as just another perpetual futures exchange, Hyperliquid is actually an innovative high-performance L1 aiming to achieve a completely on-chain financial system. Custom built and designed around a trading exchange, the Hyperliquid L1 can currently handle 100,000 orders per second, with the possibility to scale to millions per second. This capability enables a fully on-chain orderbook with sub-second latency, opening endless opportunities for additional financial applications.
Hyperliquid recently hit a record 24-hour trading volume of over $6 billion and an all-time high open interest of almost $2bn. In total, cumulative volume traded on the platform is approaching $400bn.
Hyperliquid has also become one of the most dominant perp trading DEXs in the space, accounting for anywhere between 25-35% of total daily perp DEX volume, up from just 3-7% a year ago. This rapid growth and dominance of the perp DEX market suggest traders have embraced Hyperliquid as their exchange of choice.
The founders of Hyperliquid Labs, Jeffery Yan and Iliensinc, bring impressive credentials to the table. Both are Harvard-educated with extensive experience in TradFi and crypto, making them an exceptionally qualified team to build a perpetual futures exchange and a hub for on-chain finance. Yan previously worked at the highly respected Hudson River Trading quant firm before founding his own former top 10 crypto HFT firm, Chameleon Trading. With a keen eye for market inefficiencies and after witnessing the collapse of FTX, Jeff saw much room for improvement in the DeFi trading sector, leading to the creation of Hyperliquid.
What’s the HYPE?
Hyperliquid has garnered a lot of hype and mindshare on CT, and rightfully so, with cult community members commonly referring to the platform as “on-chain Binance”. The team has continued to innovate in the DeFi trading space, now offering a fully comprehensive financial stack all on-chain: a public native ledger, a spot orderbook and a perpetual futures orderbook — each running on the Hyperliquid L1 with liquidity and latency both comparable to tier 1 CEXs.
The L1 is currently live and powered by the custom HyperBFT consensus protocol, an advanced mechanism built upon HotStuff and written entirely in Rust, allowing for the high throughput capabilities of up to 2 million orders per second. The L1 also features the HyperEVM as part of the blockchain, an all-purpose EVM currently in testnet that will allow dApps and tokens to interact directly with other native components of the L1, such as the spot and perp orderbooks. This further expands the full financial stack on Hyperliquid, and will allow ERC20 tokens to be tradable in the on-chain orderbooks as well as simultaneously used within applications on the EVM. It’s important to note that the HyperEVM is not a separate chain, but instead a parallel EVM secured by the same HyperBFT consensus protocol. With over 30 teams prepared to deploy apps on HyperEVM, anticipation is building for the mainnet launch, which will coincide with the HYPE TGE. HYPE will serve as the network’s staking token.
Built upon their technical innovation, the team has made the UX on Hyperliquid one of the most enjoyable out there. After bridging USDC from Arbitrum to make a deposit, users can appreciate simple, one-click and completely gas-free trading with liquidity and speed only familiar to them from CEX’s like Binance. With no gas fees and nearly instant settlement, users are able to submit and update orders as much as they please, attracting even more liquidity and making the platform very appealing to market makers — especially through their API.
As a frequent user of Hyperliquid, I can personally attest to the platform’s strengths. The deep liquidity and smooth, gas-free trading experience is unparalleled and rivals even top CEXs. The UI makes it easy to trade on both desktop and mobile, even offering a progressive web app (PWA) version that you can ‘install’ on your phone for an on-the-go app experience.
What I find most compelling is the potential of Hyperliquid’s full financial stack, with native spot and perp orderbooks. Ultimately, I envision a future where users can on-ramp USDC/cash directly to Hyperliquid, buy and sell spot tokens that can be used on the EVM or withdrawn to native wallets just like you would with Coinbase or Binance – completely removing the need for that centralized middleman.
That said, the platform isn’t without weaknesses. In the earlier days of Hyperliquid, I encountered liquidity issues during periods of volatility, often leading to significant price wicks and even liquidations. Ironically, the issues were caused by too much traffic and network congestion, preventing traders and market makers from submitting trades or providing liquidity. These backend issues were promptly fixed by the team and since then, have even offered refunds to traders with losses or liquidations below the oracle prices. Since these fixes, I’ve encountered no issues or death wicks while trading on Hyperliquid and the product only continues to improve.
Another frequent critique, the L1 currently achieves its exceptional UX and speed through a set of 4 co-located validators all managed by the team. However, the team has already demonstrated the scalability of the HyperEVM on testnet, where over 40 globally distributed validators maintain similar performance metrics. An interesting thread from @stevenyuntcap shows a side-by-side demo of the performance between the networks. Only time will tell but this successful testnet validation suggests that the planned transition to a more decentralized validator set through the HYPE token’s proof-of-stake mechanism can maintain the platform’s high-performance characteristics while improving decentralization.
The Hyperliquid Liquidity Provider (HLP) vault is another flagship feature of Hyperliquid, where users can deposit USDC to provide liquidity across all listed assets on the exchange. Depositors earn a portion of trading fees plus returns from the HLP market making strategy, creating a flywheel that attracts even more liquidity to the platform. As of this writing, the HLP vault has delivered a ~2.2% return for November, which annualizes to 29%, with a max all-time drawdown of only 5.7%.
Utilizing the HLP vault’s mechanics, the team opened the opportunity for anyone to create their own trading vaults. Any user can deposit into these vaults and earn a portion of the vault creator’s profits for a 10% fee — or, less enjoyably, suffer their losses with them.
More recently, the Hyperliquid team introduced builder codes, an ingenious feature that lets any DeFi app creator tap into HL liquidity and build on top of the L1 without worrying about sourcing liquidity or getting trapped in adverse market making deals. Jeff describes builder codes as the “AWS of liquidity” – providing developers the solid foundation they need to focus on building superior products and acquiring users, further cementing Hyperliquid as the center of on-chain finance. A prime example is Okto, one of the first apps to launch using builder codes. This self-custody mobile trading app enables users to deposit from other networks like Solana and Base, receive instant phone notifications for trades, and access pro-level TradingView charts – all while trading on the Hyperliquid exchange.
Sustained Growth in the Post-Points Era
While many believe the majority of trading volume and usage of Hyperliquid was driven by incentives and points farming, we have seen only increases in volume traded and open interest since the end of the last points season on October 1st.
Not only increases in volume, USDC deposits on Hyperliquid have also skyrocketed. From an on-chain balance of ~600m USDC following the end of season 2 in October, the balance has nearly doubled as there is almost 1bn USDC on Hyperliquid at the time of this writing. One could assume that many are getting ready to buy the upcoming HYPE token launch, but we’ll see.
As a power user of Hyperliquid, I could not see myself trading on any other DEX — with or without points and airdrops. In my own experience, most of the time a project runs a points program, the points become the product and the product just exists as an intermediary. This was not the case for Hyperliquid however, as users enjoyed the product immensely and the points earned were just a side benefit. Of course there was some degree of farming from some, but as evidenced by the post-points era, trading on Hyperliquid is here to stay.
Adding to the bright outlook of HYPE, the upcoming native Hyperliquid token, we have recently entered an incredibly bullish environment going into the end of year. As BTC reaches over $90,000 and we await the entrance of a much more crypto-friendly government in the US, trading volume will likely continue to expand, setting Hyperliquid as a primary beneficiary.
Another key to the post-airdrop success of Hyperliquid is the fact there are no VC or outside investors. While sometimes necessary to get a project running, raising VC capital in the crypto space can lead to long-term detrimental effects as large parts of token supplies flood the market from participants that are already up many multiples. Not only do they not have tokens, I would wager a majority of investors are dying to get some exposure to Hyperliquid, driving even more inflows to the token.
As the team demonstrated with the PURR airdrop—the mascot memecoin and first spot token listed on Hyperliquid—a fair, community-first token distribution is their priority. It’s reasonable to assume that the team will likely airdrop a large portion of the HYPE supply to the community, a stark contrast to most recent token launches.
The HYPE Token & Your Points Valuation
The Hyperliquid team has been very quiet on the details of the HYPE token. In mid-October, there was a portal launched where users needed to accept the terms of the token genesis event in order to participate in the airdrop. This was recently closed and we are awaiting further detail regarding the TGE and tokenomics.
We do know that the HYPE token will be the base for the HyperBFT and HyperEVM proof-of-stake consensus mechanism, while possibly offering more features like governance and revenue accrual. An interesting thread from @basicker_eth outlines some discoveries in the javascript on the Hyperliquid website. He highlights 3 webpages currently being tested: Governance, CreateProposal and ViewProposal. These pages show details and tools for staking and delegating tokens, as well as potential requirements for creating and voting on proposals.
While we await full tokenomic details for HYPE, it’s difficult to get a precise valuation of points without knowing exactly how much of the supply will be airdropped or their full utility. Based on pre-market trading apps like Aevo, Gate.io and LPoints, HYPE has been trading between 3-4.5bn FDV, which seems to be the consensus across X as well. Using this model from ASXN, we can get an idea of points value at each airdrop percentage and possible FDV.
Assuming a rumored airdrop at or over 30% of the supply at a $3.5 billion FDV, each point could hold a value above $20.
Disclaimer: I have Hyperliquid points.