Why Traders Are Flocking to Hyperliquid

TLDR

Hyperliquid has grown from a small DEX to a powerhouse with $753M TVL and daily volumes over $1B, sometimes exceeding the next three perpetual DEXes combined
Built on its own custom L1 blockchain (HyperEVM), it can process up to 200K transactions per second with just 0.2s latency, far outperforming traditional chains
The platform introduced "Pre Markets" allowing traders to speculate on tokens before they officially launch, with LayerZero (ZRO) being the first pre-launch listing
The team is surprisingly small with only 8 members from Harvard, MIT, and Caltech, and remains entirely self-funded without any VC backing
Users can join "Vaults" to automatically copy successful traders' strategies, with vault leaders earning 10% of profits generated
Hyperliquid will launch its HYPE token and airdrop through the Hyperliquid Foundation, with user eligibility requiring acceptance of terms by November 11, 2024

Join us in showcasing the cryptocurrency revolution, one newsletter at a time. Subscribe now to get daily news and market updates right to your inbox, along with our millions of other subscribers (that’s right, millions love us!) — what are you waiting for?

Introduction

If you speak to any active DeFi user this year, chances are they’ve already heard of Hyperliquid. From just another perpetual DEX accessible only from Arbitrum, Hyperliquid has grown into so much more, quickly making waves in the crypto space for its innovative design and impressive performance in just under two years.

But what exactly is Hyperliquid, and what sets them apart from the other hundred perpetual DEXes out there?

What Is Hyperliquid?

Hyperliquid is a perpetual DEX protocol built on its very own custom-built L1 blockchain, designed to replicate the user experience of centralized exchanges. Their main product offering is a fully on-chain orderbook DEX, offering both perpetual and spot trading.

Since kicking off Hyperliquid Mainnet Closed Alpha in February 2023, the platform has since grown to become one of the top perpetual DEXes in the space, with a total value locked (TVL) of $753M and daily volumes regularly surpassing $1B. This puts Hyperliquid far ahead of its peers, with its volume sometimes even exceeding the volumes of the next three perpetual DEXes combined.

Source: The Block (Link)

Perpetuals Trading

Hyperliquid’s first and main product is its perpetual DEX. The project first launched in Closed Alpha in February 2023, with their first supported assets being BTC, ETH, ATOM and MATIC, enabling leverage of up to 50x. By March of the same year, this list had grown to 12 assets, including the listing of the ARB token, which had just launched at that point.

Hyperliquid introduced Pre Markets, allowing traders to speculate on soon-to-be-launched tokens. LayerZero's governance token (ZRO) became the first pre-launch listing on September 7, 2023. Upon token launch, these pre-launch contracts automatically convert to standard perpetual contracts. The platform later added other anticipated tokens before their generation events (TGE), including Blast (BLAST), Jupiter Exchange (JUP), and EigenLayer (EIGEN).

Today, Hyperliquid’s perpetual offering has grown to over 135 pairs, with tradable assets across various verticals.

Spot Trading

As its first points season neared its end, Hyperliquid launched PURR, a cat-themed memecoin exclusively listed on their platform as a spot market—a first for Hyperliquid. The launch served two purposes: introducing spot market trading and rewarding loyal users with PURR tokens based on their accumulated points.

Hyperliquid's entry into spot markets came with an innovative listing process: a Dutch auction held every 31 hours where users bid for ticker rights. This permissionless yet selective approach aims to filter out low-quality projects, though some critics argue it creates centralization and limits token variety.

While memecoins dominated the new listings, other projects also chose Hyperliquid as their primary DEX. Notable examples include perpetual DEX aggregator Rage Trade (RAGE) and omni-chain NFT launchpad OmniX (OMNIX).

Hyperliquid’s Oracles

Hyperliquid’s oracle computes the spot price of tokens traded on the platform from a selection of centralized exchanges including Binance, OKX, Bybit, Kraken, Kucoin, Gate.io and MEXC, with the weights of 3, 2, 2, 1, 1, 1, 1 respectively assigned to each. This oracle price is published every 3 seconds, which is a key component in the computation of funding rates and the mark price, which is used for margin computations, liquidations and triggering orders.

HyperBFT and HyperEVM

Along with the launch of spot markets on Hyperliquid, the platform announced the next step in its roadmap, HyperEVM.

HyperEVM is a custom-built chain aimed at optimizing performance and handling the needs of the Hyperliquid DEX. This enables the platform to rival existing centralized solutions through increased throughput and reduced latency, which could not be possible on other general-purpose blockchains.

HyperEVM is powered by the HyperBFT consensus mechanism, a Rust-based implementation to replace the existing Tendermint consensus mechanism. The Tendermint consensus mechanism is capped at 20K transactions per second, which limits the performance of the Hyperliquid DEX. On the other hand, HyperBFT can theoretically process up to 2M transactions per second, although in practice, the numbers likely run closer to 200K transactions per second due to the bottleneck from state machine execution. It also significantly reduces latency on the chain to 0.2s. Moreover, transactions can continue to be sequenced without having to wait for the hash of the current block, unlike in Tendermint and Ethereum.

HyperEVM's launch extends beyond powering Hyperliquid's DEX—it creates a foundation for a broader ecosystem of DApps. Though still in testnet, over 30 projects spanning lending protocols, Telegram bots, and GambleFi applications are already preparing for mainnet deployment.

Vaults and Hyperliquidity Provider (HLP)

The HyperLiquidity Provider (HLP) pool powers Hyperliquid's deep liquidity through user-deposited USDC. As counterparties to platform traders, HLP depositors earn yields from funding payments and trader losses. This model has proven profitable for depositors, generating a 14% APR over the past 30 days—a return driven by the historically negative performance of short-term traders.

Source: Hyperliquid Stats (Link)

Users may also deposit into Vaults, allowing them to copy all of the trades made by the Vault’s leader, effectively earning them a share of the Vault’s profit. For their effort, the Vault leader earns a share of the Vault’s total profit, usually set at 10%. That said, if the Vault loses money instead, naturally depositors also bear a share of the loss.

At the moment, outside of HLP, Hyperliquid’s vaults contain ~$18.6M in TVL.

Source: Hyperliquid Vaults (Link)

The Hyperliquid Team

The team behind Hyperliquid is lean, with only five engineers and three non-technical members, all of whom hail from Harvard, MIT and Caltech. In fact, the two co-founders of Hyperliquid, Jeff and Iliensinc, were classmates at Harvard.

Born from a crypto market-making team's frustration with DEX performance in 2020, Hyperliquid emerged to bridge the gap between decentralized and centralized exchanges. The project remains entirely self-funded, avoiding venture capital influence—a stance that has attracted investors wary of "VC coins" and seeking this cycle's breakout success.

Hyperliquid Point Program

In November 2023, Hyperliquid announced the beginning of its points program, rewarding traders on the platform for their trade volume and referrals. The program lasted 6 months, distributing a fixed 1 million points per week across all traders on Hyperliquid.

Source: Hyperliquid Points Announcement (Link)

The team announced a second round of points, termed L1 Points, which started on 29 May 2024, distributing 700K points weekly for four months, ending at the end of September 2024. Additionally, a bonus point multiplier was awarded to users who were active from 1-28 May 2024, the period between the first and second point programs, to reward user loyalty.

The HYPE Token and Airdrop

Hyperliquid announced the formation of the Hyperliquid Foundation and the upcoming launch of their native token, HYPE, on 14 October 2024. Alongside the launch of the token, an airdrop will also be distributed to eligible users.

While the tokenomics of the HYPE token and airdrop allocations have not been announced, users can check their eligibility on the Hyperliquid Foundation site, where eligible users are required to review and accept the Genesis Event Terms by 11 November 2024.

This article contains links to third-party websites or other content for information purposes only (“Third-Party Sites”). The Third-Party Sites are not under the control of CoinMarketCap, and CoinMarketCap is not responsible for the content of any Third-Party Site, including without limitation any link contained in a Third-Party Site, or any changes or updates to a Third-Party Site. CoinMarketCap is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement, approval or recommendation by CoinMarketCap of the site or any association with its operators. This article is intended to be used and must be used for informational purposes only. It is important to do your own research and analysis before making any material decisions related to any of the products or services described. This article is not intended as, and shall not be construed as, financial advice. The views and opinions expressed in this article are the author’s [company’s] own and do not necessarily reflect those of CoinMarketCap. CoinMarketCap is not responsible for the success or authenticity of any project, we aim to act as a neutral informational resource for end-users.