Hyperliquid - A New Paradigm

How Hyperliquid is changing the on-chain landscape...

Over the past year, nearly every major token launch has featured the same basic distribution. Low floats and high FDVs, where often 50%+ of the total supply is distributed to team members/VCs that are already up 10-100x on their initial investments. While this industry once promoted democratized and fair fundraising/token structures, we’ve seen this methodology flipped on its head in recent months/years, as the majority of price appreciation now occurs in private markets.

We all know how this ends. As new investors flow to the space, these predatory unlock schedules will lead to down-only tokens where only the VCs escape unscathed. While this is a reality that most investors today understand, is it acceptable as an industry? As people grow weary of these greedy token distributions, teams who have taken a grassroots community-oriented approach will continue to be pushed. We’ve already seen early successes of this from projects like FriendTech, which could lead to a new paradigm of token launches.

This leads us to the topic for this article, which is a community-oriented performant L1 blockchain that has already amassed thousands of users, all while receiving zero VC funding since its inception.

That’s right, today we’re talking about Hyperliquid and how they’re revolutionizing the on-chain landscape.

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What is Hyperliquid

In short, Hyperliquid is a performant L1 optimized from the ground up for fast, secure, and cheap trading. The Hyperliquid L1’s flagship orderbook DEX has achieved nearly $200B in derivatives volume since its launch early last year, which has been due to its unique UX, wide range of supported assets, and points program.

On-chain perps have grown to become one of the largest sectors within the on-chain landscape due to their ease of use when accessing leverage for volatile assets. As capital continues to flow on-chain, perpetual DEXs like Hyperliquid will likely grow in tandem as users speculate on assets. Even with the points program recently ending, Hyperliquid has seen very little changes in volume and TVL, signifying just how sticky the platform is.

While there is constant competition between the various perp DEXs, Hyperliquid supports just about anything a user could ask for…

• High leverage (up to 50x on majors) ✅

• Competitive trading fees ✅

• Multiple order types ✅

• Cross or Isolated Margin ✅

• Dozens of assets to trade ✅

• Lucrative and customizable vaults ✅

• Referral system ✅

• And much more…

While the Hyperliquid Perpetual Exchange is the flagship product of the platform, that’s just scratching the surface of what is being built. More specifically, the team has been focusing on expanding its underlying L1 as its own fully permissionless and composable blockchain.

Let’s talk a little bit about how it all works.

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The Hyperliquid L1

The Hyperliquid L1 is a Proof of Stake chain that leverages a modified version of the Tendermint consensus, similar to most Cosmos-based chains. This architecture allows Hyperliquid to support 20k orders/second, enabling gas-free transactions and extremely quick finality.

In the near future, a new consensus mechanism implemented in Rust called HyperBFT will be introduced, which will massively improve TPS, sequencing, and latency (which you can read more about in the tweet below).

Due to these extreme optimizations, the Hyperliquid DEX is able to support a fully on-chain orderbook. Every order, cancel, trade, and liquidation occurs on-chain with <1 second latency. Aside from the benefits that this brings to the Hyperliquid DEX, this will also make Hyperliquid home to use cases that cannot be implemented on other EVM-based chains.

As a step towards this reality, Hyperliquid has already begun to implement spot markets for their previously perp-only exchange. To stress test this new system, Hyperliquid created and airdropped the PURR memecoin to point holders, which has no utility outside of being the main proxy for the HYPE token.

While spot market creation is currently not permissionless, Hyperliquid Improvement Proposal (HIP) 1 and 2 implement a native token standard as well as a mechanism for automatically providing liquidity to the Hyperliquid orderbook (which you can read more about here).

Teams like Rage Trade have recognized this opportunity, and are already planning to launch their own token on Hyperliquid.

An important point to understand is that the Hyperliquid L1 is centralized at its current point in development. Since there is no native token that can be used to decentralize the validator set, the team is currently responsible for securing the chain, though this will change when the HYPE token is introduced.

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The Bull Case

At first glance, Hyperliquid may seem like just another new L1 bragging about its almost unnecessarily high level of throughput. With so many projects launching their own chains to boost valuations, why is Hyperliquid any different, especially when we already have other high-throughput L1s?

Apart from the innovative technology that powers the underlying L1 and their widely used DEX, Hyperliquid has something that no other L1 has. In a world where nearly every new token is propped up by VCs, a project like Hyperliquid that has grown to such a point organically is practically unheard of. This in itself is a powerful narrative, and could play a core part when onboarding users from other ecosystems.

This community-oriented approach has allowed them to attract the attention and mindshare of builders and users alike. Given incentives are managed well and the team continues to build towards this vision, Hyperliquid could easily become a competitive player within the L1 ecosystem.

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Conclusion

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In conclusion, we believe that Hyperliquid will be looked back on as one of the most obvious bets of this cycle. Launching just over a year ago as a grassroots perp DEX, Hyperliquid quickly grew to dominate the on-chain landscape without receiving any VC funding, while continuously giving back to their community. Now that the flagship product has achieved undeniable PMF, Hyperliquid is expanding into a fully permissionless L1 ecosystem competing along the likes of many other multi-billion dollar projects.

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