Hyperliquid: on-chain trading new arena, Decentralized Finance new ecosystem

Hyperliquid is a high-speed on-chain perpetual contract DEX, operating on a self-developed Layer 1, providing centralized exchange-level performance while maintaining on-chain transparency. Its native token $HYPE is responsible for network governance, can reduce transaction fees after staking, and captures value through buybacks from listing auctions. The core liquidity of the protocol is the HLP Vault, a hybrid treasury that combines market makers and liquidators, accounting for over 90% of the TVL.

In March 2025, Hyperliquid encountered a serious black swan event: the $JELLYJELLY manipulation incident, which nearly triggered a chain liquidation of the entire treasury. The incident exposed the centralization issue of validator governance: intervention by the Hyper Foundation prevented a collapse, which, while ensuring survival, sparked decentralization controversies. However, after the crisis, Hyperliquid quickly rebounded thanks to whale stickiness and ecological expansion, setting new highs in trading volume, open interest, and $HYPE price. Now, the platform (, including HyperEVM), has launched over 21 new dApps, covering NFT, Decentralized Finance tools, and treasury infrastructure, with capabilities far exceeding those of perpetual exchanges.

Where do "Degen" whales trade?

James Wynn is a well-known degen in the crypto space. He is an anonymous whale who turned $210 into $80 million in three years. His most famous achievement is turning $7,000 of $PEPE into $25 million, and he often uses 40x leverage to create nine-digit positions.

Wynn often publicly displays his entry points, responding in real-time to market fluctuations, and even turns a blind eye to eight-digit liquidations. But the real key is not who Wynn is, but where he trades.

For Wynn and all high-leverage, high-position degens, Hyperliquid is the new arena. Anonymous whale (, known as "Insider Brother" ), is trading large positions on Hyperliquid, and their positions are now regarded by Chinese crypto media as a real-time barometer of market sentiment and platform dominance.

So how did Hyperliquid get to this point? Why do high-risk traders choose it?

We will break it down one by one.

What is Hyperliquid?

Hyperliquid is a decentralized exchange, but it does not use the AMM model like Uniswap.

It uses a completely on-chain order book mechanism, pricing not through liquidity pools, but through on-chain matching, providing a real-time trading experience similar to CEX. Limit orders, transactions, cancellations, and settlements all occur transparently on-chain and can be settled within a single block.

Hyperliquid has built a dedicated Layer 1 blockchain, also named "Hyperliquid", specifically designed for high performance. This is what enables it to execute trades at the speed and stability required by high-frequency traders.

This performance is not just talk. By June 2025, Hyperliquid will have a market share of 78% in the on-chain derivatives market, with a daily trading volume exceeding $5.5 billion.

$HYPE

Hyperliquid is not just a trading platform, but a complete on-chain financial system, and its core token is $HYPE.

Tokenomics and Philosophy

The total supply of $HYPE is 1 billion tokens, which will be distributed through a large-scale airdrop in November 2024. 31% of ( will be allocated to about 94,000 users, making it one of the projects with the most genuine user distribution in recent years.

A total of 70% is allocated to community airdrops, incentives, and contributors: there are no VCs. This is based on the explicit philosophy of founder Jeffrey Yan. He is a Harvard math graduate and a former high-frequency trading engineer at Hudson River Trading.

Yan has publicly stated: "Letting VC control the network will be a scar." He hopes to build a financial system "constructed by users and also belonging to users."

This concept of "community first + protocol performance" is also reflected in the mechanism design of $HYPE: it is not only a governance tool but also a practically usable token.

![IOSG Interpretation of Hyperliquid: Degen New Arena, Decentralized Finance New Ecosystem])https://img-cdn.gateio.im/webp-social/moments-3311fc0c4515058639f6922f8eb80a24.webp(

实用性)Utility(

$HYPE not only has governance functions but is also directly used to reduce transaction fees. Users can stake $HYPE to receive fee discounts.

In addition, $HYPE is still the core of network security. Hyperliquid operates on a Proof-of-stake consensus mechanism, and staking $HYPE is not just for reducing fees or earning rewards; it is the foundation of the entire block generation mechanism.

To become a validator, the following conditions must be met:

• At least stake 10,000 $HYPE
• KYC/KYB identity verification
• Build a highly available infrastructure ) including multiple non-validating nodes (
• Node performance will be continuously monitored and managed through the delegation program of Hyper Foundation for equity distribution.

The current annual staking yield for validators is approximately 2.5%, with the yield curve designed based on the Ethereum model.

)# Other features of Hyperliquid

a.HIP-1 Auction Mechanism: Decentralized Coin Listing Process

One of Hyperliquid's most unique and often underestimated mechanisms is its auction-based token listing system: HIP-1.

The mechanism determines the listing qualification of the new Token through on-chain Dutch auctions:

• The starting price is twice the last transaction price;
• The linear decline lasted for 31 hours, reaching a low of 10,000 USDC;
• The first wallet address to accept the current price will gain the right to create and launch the Token.

Unlike centralized exchanges ### such as Binance and Coinbase ( that operate in a black box and charge high listing fees, the HIP-1 listing is completely transparent, requires no negotiations, and has no insider allocations.

For example, at the end of 2024, the CEO of Moonrock Capital accused a trading platform of demanding 15% of tokens as listing fees from a certain Tier 1 project. ) is approximately between $50 million and $100 million. (. It was also reported that a certain trading platform required listing fees as high as $300 million.

Even if a trading platform introduces a "Batch Vote to List" mechanism, there still exists an opacity issue where 2 projects are voted to be listed, but in reality, 4 projects are launched.

And on Hyperliquid:

• The auction process is fully on-chain and entirely executed by smart contracts;
• 100% of listing fees go into the Assistance Fund ) and are used for the buyback and destruction of $HYPE;
• No team commission, nor reserved quotas.

Compared to other protocols where teams and VCs obtain listing fees, Hyperliquid's fee distribution logic is:

• All fees are obtained by the community: shared by HLP, the aid fund, and spot publishers.

However, despite the transparent mechanism, there are still significant issues in Hyperliquid's spot market.

• Most auction transaction prices are close to the reserve price (, such as 500 $HYPE ), reflecting limited market interest in on-chain coin offerings.
• The trading volume of the token after going live is extremely low;
• The official page does not clearly indicate information about newly listed coins, resulting in low attention;
• The current spot market accounts for only 2% of the total spot trading volume on DEX, of which 84% is the $HYPE/USDC pair.

If Hyperliquid wants to truly challenge the listing status of centralized exchanges, it must enhance UI visibility, activity, and linkage with the secondary market.

b.Vault mechanism

Hyperliquid not only serves active traders but also provides users with a way to earn passive income through the vault ( system, allowing funds to participate in algorithmic trading strategies.

Currently, there are two types of vaults:

• User-created Vaults ): Anyone can initiate a vault and use the liquidity pool for trading. Investors share profits and losses proportionally, while vault managers can collect 10% of the profits as a management fee. To ensure alignment of interests, managers must self-stake no less than 5% of the vault's TVL ( total locked value ). This model is similar to centralized exchanges' "Copy Trading (".

• HLP)Hyperliquidity Provider(: The HLP treasury operates market-making strategies on Hyperliquid. Although the strategy execution is currently still taking place off-chain), its positions, orders, trading history, deposits, and withdrawals are all publicly available on-chain in real-time for anyone to audit. Anyone can provide liquidity for HLP and share profits and losses proportionally. HLP does not charge any management fees, and all profits and losses will be distributed entirely proportionally based on each provider's share in the treasury.

Currently, HLP accounts for 91% of Hyperliquid's total TVL. Its strategies are divided into two categories:

做市(Market Making):

• Continuously post buy/sell dual quotes;
• Earn the buying and selling spread ( spread ).

Clearing ( Liquidator ):

• When the user's margin falls below the maintenance margin, the platform attempts to place a limit order for liquidation;
• If the position falls below 66% of the maintenance margin, the system will call the liquidation treasury to take over the position.
• HLP attempts to limit the price closing, reducing slippage and risk;
• If the risk is too high and cannot be controlled, it will trigger the Auto-Deleveraging(ADL) mechanism to force liquidation.

In summary, HLP = Market Maker + Clearing House.

• As a market maker, HLP continuously provides liquidity ( bilateral quotes );
• As the liquidator, HLP takes over the positions of users who have been liquidated and processes the reduction in positions.

Summary

The revenue structure of the Hyperliquid platform is as follows:

• Trading fee ( Taker/Maker ): allocated to HLP depositors;
• Auction and spot trading fees: 100% goes to the assistance fund for the repurchase and destruction of $HYPE;
• No team commission/financial fees deduction, different from most DEX.

Performance of HLP

We measure the actual protocol income of HLP through "Hedged PnL(". This data does not include the unrealized gains or losses from market fluctuations, and only includes:

• taker/maker trading fee;
• Funding rate income;
• Settlement fees, etc.

Therefore, it reflects the protocol's true "Alpha" capability.

The data shows that during the bullish trend in 2025, HLP's daily net position is usually negative, indicating that it is shorting the market for most of the time. This is because the platform has a large number of limit buy orders, and HLP passively takes on sell orders, leading to an overall bearish exposure.

In March, we can clearly see a huge spike, with a net nominal exposure approaching -$50 million. This was precisely the moment on the day the $JELLYJELLY event erupted, when Hyperliquid was nearly breached.

![IOSG Interpretation of Hyperliquid: Degen New Arena, Decentralized Finance New Ecosystem])https://img-cdn.gateio.im/webp-social/moments-41ee5732b3bb7377f29abfe60e360189.webp(

) Hyperliquid's risk exposure

The risk concentration issue of HLP

As mentioned earlier, HLP accounts for over 90% of the TVL on Hyperliquid, and simultaneously takes on the main liquidity source and liquidation responsibilities of the platform. Such a high degree of concentration poses systemic risk: if HLP fails, the entire platform may collapse.

We can see that HLP TVL accounts for about 75% of the total TVL of the entire hypeliquid chain.

This was starkly exposed during the $JELLYJELLY incident in March 2025. The incident was a carefully orchestrated attack that nearly caused a systemic chain liquidation of the entire HLP treasury.

The event process is summarized as follows:

• $JELLYJELLY is a meme + ICM project on Solana, with a market cap that once reached $250 million, then fell to $10 million, with extremely low liquidity;
• The attacker deposited 3.5 million USDC as collateral on Hyperliquid;
• Short $JELLYJELLY at a price of $0.0095, with a short amount of approximately $4.08 million;
• A large amount of spot buying at the same time caused the spot price to skyrocket;
• Withdraw margin again, causing the position to be forcibly liquidated, HLP takes over the short position;
• There are no counterpart buy orders in the market, HLP is passive.