A Deep Dive into the Success and Concerns of Hyperliquid

Author: Shisi Jun

 

1. Research Background

I have recently studied almost all the Perps (perpetual trading platforms) on the market. The 5x growth of the hype market once again proves that when I first researched it last year, I overlooked its core value.

Moreover, recently aster, antex, dydxV4, and even Sun Ge have entered the field, causing the Perps sector to boom, with sunPerps shaking up the track.

In addition, major exchanges are rushing to list hype and its perpetual trading capabilities. Yesterday, it was reported that metamask, after phantom, became another large wallet platform planning to integrate Hyper's perpetuals. Even circle has become its validator, dispelling its core decentralization concerns. Hyperliquid itself is also making efforts to continuously improve its openness, especially with the gradual rollout of hyperEVM, hip2/3/4.

1.1 Three Key Elements of a New Track

At this point, Perps basically possess the three key elements of a new track.

Looking back at any major industry wave in history, we can see that it is often driven by a new leading platform, new wealth opportunities, and a new narrative background. The convergence of trends brings a peak, followed by airdrop strategies from platforms, increasing platform complexity, and a decline in user novelty, which eventually leads to a trough.

This process has already gone through many cycles. Typical scenarios are as follows, and each module has been analyzed in previous articles on the "Shisi Jun" public account. Interested readers can look them up:

• The ICO frenzy in 2017, with cex as the corresponding platform. This met basic demand and is still thriving for many today.
• The DeFi Summer of 2021, with uniswap and lending/stablecoins as the platforms, same as above.
• The NFT boom in 2022, where the protocol existed early on but only peaked with opensea. The root was price discovery through trading, which then drove dissemination. Its decline was due to arrogance, with airdrop strategies and royalties causing a death spiral of price chasing—self-inflicted.
• The inscription craze in 2023, with unisat as the platform. Its decline was due to shortsightedness—only asset issuance during the hottest period, but no applications, resulting in a short narrative lifecycle. When new narratives like rwa and perps arrived, they took away attention, and recent alkanes and brc2.0 couldn't regain the heat—again, self-inflicted.
• The meme wave in 2024, with corresponding pump platforms and this year's dark horse axiom, making this round unusually long-lasting. This is due to the chain's trading advantages and the constant influx of new traders, plus the compliance wave bringing new users, extending the lifecycle.
• Finally, in 2025, both rwa (focused on stocks) and Perps (led by hyperliquid) will coexist.

2. Key Steps in Hyperliquid's Development

2.1 Current Development Status

Objectively speaking, the system is still relatively centralized, theoretically capable of being shut down or altered. There are also hacker funds on the platform, which is a major hurdle for many exchanges in terms of compliance and popularity. However, its data is quite contradictory.

Hyperliquid currently has about 10,000 to 20,000 active users daily, with a total user base of around 600,000. Among them, 20,000 to 30,000 core users contribute nearly 1 billion USD in revenue, a large portion of which comes from the United States.

It has accumulated over 3 trillion USD in trading volume, with an average daily trading volume close to 7 billion USD.

Currently, it supports Perps trading for over 100 assets.

Looking at its data, it can only be said that it is excellent. The user base may not be large, but they are the most capital-generating group.

2.2 Major Updates and Interpretation

The specific timeline is as follows:

• March 25: Opened HyperCore and HyperEVM connection, theoretically allowing users to trade core tokens from EVM (limited to trading at that time).
• April 30: Launched precompiled reading functionality, enabling HyperEVM smart contracts to read states from HyperCore.
• May 26: Reduced block time by half to 1 second, increasing HyperEVM throughput.
• June 26: HyperEVM blocks updated, removing previous sorting of only published orders to improve integration with HyperCore.
• July 5: HyperEVM updated with a new precompiler called CoreWriter, allowing HyperEVM contracts to write directly to HyperCore, including placing orders, transferring spot assets, managing treasury bills, and staking HYPE.
• Recently, there is also Builder core and Hip4, entering the data prediction market. This move was completely unexpected by the market, indicating that the founder has a unique perspective on industry pain points, which often leads to platform polarization.

How should we interpret this series of updates?

First, compared to last year, Hyperliquid has now opened up core order operation capabilities.

HyperEVM

Especially with its dual-chain architecture based on EVM, the logic is quite remarkable. Under the premise that HyperCore is not open (cannot be deployed), HyperEVM adds a large number of precompiled contracts and is natively integrated with HyperCore. Theoretically, it supports wallet (phantom, metamask) and exchange integration, and can execute EVM trading operations for buying and selling Core's order assets.

The official diagram below shows the positioning of hyperEVM in the system:

 

It can be seen that both HyperCore and HyperEVM write and read operations are confirmed by HyperBFT. The specific mechanism for validator confirmation has not been disclosed, and there is no cross-chain bridge or delayed synchronization.

On-chain transactions show that HyperEVM can affect HyperCore through a system contract (0x333…3333, CoreWriter.sendAction(...)) to execute write operations, such as placing orders, liquidation, and lending.

The state feedback from HyperCore (from the previous block) can be read by HyperEVM smart contracts.

• User data—positions, balances, and insurance vault information
• Market data—mark price and oracle price
• Staking data—delegation and validator information
• System data—L1 block count and other core metrics

The information is essentially received by EVM system contracts, generating corresponding receipts or events for recording. In EVM, precompiled contracts (0x000…0800) can be called for perp positions or oracle price (oraclePx).

Secondly, the implementation of hip2 and hip3 is changing hyperliquid's platform positioning.

Hyperliquidity

This is an on-chain liquidity mechanism built into Hypercore.

It automatically places buy and sell orders based on the current price of the token, maintaining a narrow spread of about 0.3% without manual intervention.

This mechanism allows for native-level liquidity insertion operations within the block logic, even without AMM or third-party bots.

For example, when the PURR/USDC spot market was launched,Hyperliquidity immediately placed initial deep seed trades, enabling real trading before normal user liquidity arrived.

Builder core

This is a mechanism with great future value, allowing Defi builders (developers, quant teams, aggregators) to charge additional service fees as income when placing orders on behalf of users. The application scenarios are clear—it's an open profit-sharing move to welcome ecosystem co-building.

• **Quantitative strategy hosting:** Quant teams help users place perp position orders and charge a management fee via builder fee, forming a "profit sharing + builder fee" compound profit model.
• **Aggregator/trade routing:** For example, 1inch, Odyssey, etc., integrate perp trading services on Hyperliquid and can charge builder fees as routing income.

Upon initial launch, some projects have already received over 10 million USD in dividend income, showing the effect of deep capital accumulation at the platform level on hyper.

In fact, opening up depth is not unique to hyper. Uniswap v4 previously tried to do this with hooks, but v4 didn't really take off, and most users are still used to v2 and v3.

This may be due to less historical baggage and the strong influence of centralized decision-making.

3. Summary and Comments

3.1 Many Advantages, Let's Go Through Them One by One~

Hyperliquid's primary advantage is its strong early product capability, as it addresses two user pain points:

• The trading needs of non-compliant users, which is even more valuable under this year's compliance wave.
• The needs of advanced traders for high leverage and high transparency. The former brings KOL exposure, while the latter is often overlooked by market traditionalists—hiding in plain sight—thus catching many Cex off guard.

Next is the team background. Its biggest advantage is having a small team, resulting in high communication efficiency, low friction, and high productivity. With a team of just over a dozen, excluding 3-4 product/operations/BD and front/back-end, it means just 3-4 people can build a high-performance chain with 20Wtps.

Compared to many traditional big tech blockchain teams, which often end up with internal power struggles, this is much more efficient.

In terms of background, its foundation as a market maker since 2020 provided excellent initial depth. In many details, you can feel that its matching logic is not simply settled by time or amount like other order book systems.

But due to lack of information, I'll supplement this when doing comparative analysis of multiple Perps in the future.

Then there's the trend.

Ordinary projects have to adapt to the market, but when a platform reaches its peak, the market adapts to it.

Now hyperliquid enjoys this treatment.

On one hand, it's due to the openness in the updates above, which gives various ecosystems room to enter. In contrast, many past platforms tried to do everything themselves and take all the profits—calling out opensea for creating a forced royalty system that made the market follow the leader. Each time, there were fixed high costs, interfering with the flow of goods and affecting real market pricing, eventually becoming a family heirloom.

But in hype, it opened up evm and all kinds of dex peps APIs, so the market quickly saw a bunch of derivatives.

Hyperliquid's generosity is also evident in its airdrops. From the start, it couldn't take the compliance route.

So it doesn't try to embrace so-called listing expectations, and naturally opens up profits. Then, through the Hlp mechanism, it brings hype staking back, sharing profits and earning again, allowing the official token to be decentralized and earning the rarest decentralized reputation and word-of-mouth in the market.

Its openness brings market support. Phantom was the first to integrate its perps capability from a decentralized wallet perspective. This is not too difficult, mainly requiring a lot of adaptation and development costs. Recently, there are reports that metamask is also integrating.

This also shows that those decentralized wallets that haven't updated for over half a year, after missing the inscription wave, now understand the importance of capturing the annual narrative.

Finally, it has brought in giants like circle as validators, adding decentralized security and filling its decentralization gap, giving highly compliant CEX platforms the opportunity to integrate.

3.2 Now for the Disadvantages

After overcoming the hardest initial stage, the main issue is compliance. Even pure dex platforms like uniswap are embracing compliance, let alone hyperliquid, whose users are mainly from Europe and the US. If it is deemed non-compliant or faces other serious accusations, existing CEX/wallet partnerships will be cut off, and former allies will part ways.

Additionally, the system will also face the challenge of increasing complexity as it develops. Most projects become more and more complex, making it hard to simplify and return to first principles, eventually making it difficult for new users to understand and losing fresh blood.

Finally, there's the single-point risk. The claimed 20Wtps—if multiple global platforms integrate, it will lead to a lot of data inconsistencies, putting huge pressure on the core hyperCore module. High-performance construction is not achieved overnight. With the team's market maker background, it may not withstand the traffic. If there are multiple liquidation issues caused by outages (like the squeeze event in March),

then the hard-earned reputation is essentially very fragile.