Hyperliquid (HYPE)

CLOB perp DEX. A L1 focused on creating an open financial system. Every interaction—be it an order, a cancellation or a liquidation is executed on-chain. Hyperliquid is planning to adopt HyperBFT.

Basics

• Based in:
• Started in / Announced on:
• Testnet release:
• Mainnet release:

Audits & Exploits

• Bug bounty program can be found [insert here].
• Has had 2 audits by Zellic (2-2024).

Governance

Admin Keys

• From Bankless (15-11-2024):

"Currently, Hyperliquid operates with four core validators, all run by its team members. After TGE, Hyperliquid aims to implement a validator network to decentralize transaction validation and reduce reliance on any single operator."

DAO

• From Bankless (15-11-2024):

"Through HYPE, token holders gain voting power on key decisions, from platform updates and fee structures to broader policy changes, ensuring that the community has a voice in shaping Hyperliquid’s development."

Token

Utility

In addition to governance, HYPE will likely play a role in enabling a distributed network of validators to increase network security.

Technology

• Whitepaper or docs can be found [insert here].
• Code can be viewed [insert here].
• Consensus mechanism: HyperBFT (own custom consensus algo) which is heavily inspired by Hotstuff and its successors.
• Algorithm:
• Virtual Machine: will be HyperEVM compatible (25-7-2024)
• Development language used:

Transaction Details

• Capacity (TPS): "The chain currently supports 100k orders / second." (7-2024).
• Latency: <1 second (7-2024).

How it works

• From this (potentially biased) thread (25-7-2024):

"Why do they need an L1? Put simply:

1. High Frequency Trading (HFT) profits are limited if there are other general purpose transactions occupying demand for block space and competing for gas
2. The chain must allow for specific order prioritization such as for cancels and post-only limit orders which insure market makers aren’t subjected to as much toxic flow.
3. In addition, a tailor-made solution helps optimize for specific functions, like atomic liquidations, funding distributions, and verifying solvency. "

Fees

• From their docs (7-2024):

"During the alpha phase before the native token exists, the following gas cost is in USDC. Native spot and perps order books share the same volume-based fee schedule for each address. Fees collected in non-USDC HIP-1 native tokens are currently burned as there is no mechanism implemented to accrue these to HLP. In the future, token fees could accrue to the respective Hyperliquidity strategy, native token stakers, or otherwise."

• From this (potentially biased) thread (25-7-2024):

"Hyperliquid’s trading experience is gasless; gas is only induced for transactions that increase state bloat i.e. spot listings or transferring to new wallets.

HL team has not profited off of any of the trading activity on the platform. Their only form of compensation will probably come through vested tokens."

Interoperability

• Bridging to Hyperliquid occurs through Arbitrum, however it is not a L3 (30-6-2024). Hyperliquid operates a native bridge, secured by the same validator set as the Hyperliquid L1. More info from their docs (4-2024):

"Hyperliquid runs with an EVM bridge that is secured by the same validator set as the Hyperliquid L1.

Deposits to the bridge are signed by validators on the L1 and are credited when more than 2/3 of the staking power has signed the deposit.

Withdrawals from the L1 are immediately escrowed on the L1, and validators sign the withdrawal as separate L1 transactions. When 2/3 of the staking power has signed the L1 withdrawal, an EVM transaction can be sent to the bridge to request the withdrawal.

After a withdrawal is requested, there is a dispute period during which the bridge can be locked for a malicious withdrawal that does not match the L1. Cold wallet signatures of 2/3 of the stake-weighted validator set are required to unlock the bridge.

After the dispute period, finalization transactions are sent, which distribute the USDC to the corresponding destination addresses.

There is a similar mechanism to maintain the set of active validators and their corresponding stake on the bridge contract.

Withdrawals do not require any Arbitrum ETH from the user. Instead, a withdrawal fee of 1 USDC is paid by the user on the L1 to cover the Arbitrum gas costs of the validators.

The bridge and its logic in relation to the L1 staking have been audited by Zellic."

Other Details

Insurance Fund

• From the docs (2-2024):

"A portion of net fees collected by Hyperliquid are directed towards the Hyperliquid insurance fund. Though "fund" is used to match the nomenclature of other exchanges, the Hyperliquid insurance fund will be governed by the usual decentralized L1 governance procedure.

For special circumstances where the platform behaved unexpectedly, the insurance fund may be used to pay affected users.

The purpose of what is called the "insurance fund" on other platforms is to take unwanted liquidations. This specific role of the insurance fund is performed by the Liquidator vault, which is the only liquidator on Hyperliquid."

Oracle Method

Built their own oracle (25-7-2024):

"The validators are responsible for publishing spot oracle prices for each perp asset every 3 seconds. The oracle prices are used to compute funding rates. They are also a component in the mark price which is used for margining, liquidations, and triggering TP/SL orders.

The spot oracle prices are computed by each validator as the weighted median of Binance, OKX, Bybit, Kraken, Kucoin, Gate IO, MEXC spot prices for each asset, with weights 3, 2, 2, 1, 1, 1, 1 respectively.

The final oracle price used by the clearinghouse is the weighted median of each validator's submitted oracle prices, where the validators are weighted by their stake."

Roadmap

• Can be found here (11-2023) but is bare minimum.

Usage

"It’s processed $21B in volume this week alone and has 3x’d its total share of perpetuals volume this year, climbing from ~11% in December 2023 to 33% this week." (11-2024)

• From this (potentially biased) thread (25-7-2024):

"It's still far and away behind Binance in volume, making up roughly 6% of the CEX's trading volumes in June."

Projects that use or built on it

Over 35 projects have announced to launch and integrated with the planned HyperEVM (13-11-2024) according to Messari.

Competition

• From Bankless (15-11-2024):

"The most unique feature of HIP-1, though, is its Dutch auction system for acquiring token ticker symbols. In this auction process, token creators bid for ticker symbols with prices starting high and gradually decreasing over 31 hours. With only around 280 new tokens allowed each year, this system prioritizes quality and prevents the market from becoming overrun by low-quality projects."

• From this (potentially biased) thread (25-7-2024):

"dYdX: Key differentiation between Hyperliquid and dYdX is that Hyperliquid has built its order book fully onchain. It's fully transparent (no front-running or PFOF). Having an offchain order book / matching engine saves on additional validation, but doesn't provide a meaningful long-term alternative to CEXs. Hyperliquid is also further ahead on its ecosystem, showing signs it wants to be a full-fledged network that can offer more than just a perp DEX.

Performant L1s and Parallelized EVMs: You can also make the comp to performant L1s like Solana and to parallelized EVMs like Monad or Sei. Against $SOL, the EVM is an interesting distinction and against parallelized EVMs like Sei and Monad, Hyperliquid already has a killer app (perp DEX) and stickier users.

The biggest moat Hyperliquid has however, against all other comps, is the network’s composability with a leading onchain order book. Hyperliquid is not a blank slate general purpose L1. It's optimized for HFT on an onchain order book. Perhaps Hyperliquid is much more akin to a fully onchain Binance."

Pros and Cons

Cons

• From Bankless (15-11-2024):

"Currently, Hyperliquid operates with four core validators, all run by its team members. After TGE, Hyperliquid aims to implement a validator network to decentralize transaction validation and reduce reliance on any single operator."

Team, Funding and Partners

Team

• Full team can be found [here].
• Chameleon Jeff
• "Less than 10 people" (25-7-2024)
• From their docs (4-2024):

"Hyperliquid Labs is a core contributor supporting the growth of Hyperliquid, led by Jeff and iliensinc, who are classmates from Harvard. Other members of the team are from Caltech and MIT and previously worked at Airtable, Citadel, Hudson River Trading, and Nuro."

Funding

• From this (potentially biased) thread (25-7-2024):

"Hyperliquid hasn't taken funding from private investors,"

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