$HYPE hits a new all-time high, why are all the Whales choosing to open positions on Hyperliquid?

Original Title: The Secret Sauce of Hyperliquid

Original author: @stacy_muur, CuratedCrypt0 member

In the history of DeFi derivatives, few protocols have managed to capture more than half of the on-chain perpetual contract market, yet Hyperliquid has done so. What is its secret?

Data shows that the total trading volume of on-chain perpetual contracts within 24 hours was $14.37 billion, with @HyperliquidX accounting for an astonishing $9.3 billion, making up 64.71%, demonstrating Hyperliquid’s absolute dominance in the market.

However, most DEXs have struggled to match in these areas and often rely on:

·AMM design (causing high slippage on large orders, such as GMX);

·Some off-chain solutions (such as dYdX v3) may affect transparency or increase the complexity of user usage.

Hyperliquid recognizes this issue: if the user experience is poor or there is insufficient liquidity, users will not migrate to the blockchain on a large scale. Therefore, the team is committed to providing “CEX-level speed and liquidity, but fully on-chain.”

The success of Hyperliquid proves the potential of DEX when facing giants like Binance. Binance’s 24-hour perpetual contract trading volume is $97.22 billion, while the overall trading volume of DEX is only $14.637 billion, of which Hyperliquid contributed $9.532 billion.

With Hyperliquid, the trading volume of DEX can reach 15% of Binance; without it, this ratio would drop to 5%, leaving only $5.105 billion. This demonstrates Hyperliquid’s role in driving DeFi trading.

This performance fulfills Hyperliquid’s core promise - to provide a CeFi-level trading experience on a fully decentralized Layer-1.

Background and Founding Story

Origin and Team Composition

Hyperliquid was founded by @chameleon_jeff (a Harvard graduate and former quantitative trader at Hudson River Trading) and a small team of engineers from top institutions such as MIT and Caltech.

They were engaged in high-frequency trading (HFT) during 2020-2022 and switched to trustless solutions after the collapse of FTX. Seeing billions of dollars disappear due to centralized custody, their goal became clear: to create a self-custody alternative that doesn’t sacrifice performance, and to opt for a “VC-free, self-funded” approach to ensure long-term alignment with the interests of users and traders, rather than short-term investor interests.

Why do CEXs still dominate?

Despite the collapse of major CEXs like FTX, users’ trading habits did not immediately shift to DeFi. Many traders still use centralized platforms like Binance, not because they ignore custody risks, but because CEXs always have:

·Quick and familiar interface

·Deep Liquidity

·Advanced trading features (stop loss orders, professional candlestick charts, etc.)

·No Gas fees, cross-chain without barriers

·Low threshold, convenient trading experience

2022 refers to the post-FTX crash (November-December). With 2025 data as of March 6, Hyperliquid recognizes this shortcoming: users won’t migrate on-chain on a large scale if the user experience is poor or illiquid. As a result, the team is committed to creating “CEX-level speed and liquidity, but fully on-chain.”

Product development that prioritizes user experience from day one.

Let’s take a look at Hyperliquid’s product matrix:

1. Perpetual Contract DEX

The core product of Hyperliquid is its perpetual contract DEX, which uses a fully on-chain Central Limit Order Book (CLOB) and supports:

·BTC, ETH up to 50x leverage

·SOL, SUI, kPEPE, XRP up to 20x leverage

·Small-cap tokens up to 3x leverage

Hyperliquid is built from the ground up, offering greater openness than competitors’ off-chain solutions, and is specifically designed for high-frequency trading (HFT) needs. Its features include:

·Sub-second transaction confirmation

·Processing 100,000 orders per second

·Order and cancellation experience with no or nearly no Gas fees

These key factors make its user experience comparable to CEX.

Advanced Trading Mechanism

·Atomic Operation: Atomic liquidation is supported based on the latest oracle prices, and atomic funding rates are distributed hourly.

·Asset Security Check: The platform conducts asset security verification at the end of each block.

· Order Priority: Prioritize the processing of cancellations and limit orders only, protecting market makers from malicious liquidity impacts.

As of last week, the trading volume of Hyperliquid Perps reached $66.5 billion, nearly 7 times that of the second-ranked Jupiter ($9.7 billion), and exceeded the total of its next 14 competitors ($33.6 billion).

Hyperliquid accounts for 66% of the total trading volume of the top 15 perpetual exchanges.

2. Spot Exchange

The Hyperliquid spot exchange will launch in mid-2024, initially supporting over 20 native assets including HYPE and memecoins.

Compared to Hyperliquid’s massive $1.06 trillion perpetual contract market, spot trading started small but is growing rapidly. By early 2025, with key updates (especially the launch of BTC), Hyperliquid is gradually becoming a strong competitor in on-chain spot trading.

Back in mid-2024, Hyperliquid’s spot trading was limited to its own tokens and a few other assets (such as RAGE). This limited range of assets deterred many professional traders, who preferred mainstream assets like BTC, rather than just speculative tokens.

Messari analyst MONK predicts in his report that the addition of BTC to Hyperliquid will completely change the situation, making it a one-stop platform covering both spot and derivatives trading, challenging centralized exchanges. This prediction was quickly validated on February 15, 2025, when the Unit team went live to trade BTC spot directly on Hyperliquid’s order book.

What does this mean?

·Surge in trading volume: Before the launch of BTC, Hyperliquid’s spot trading volume was only a small fraction of the monthly $63 billion BTC perpetual contract trading volume. Messari estimates that if suitable assets are introduced, the spot trading volume could reach 20%-30% of the perpetual contract trading volume, resulting in a potential increase of billions of dollars. With the launch of BTC spot trading, other DEXs have already recorded $33 billion in BTC trading volume per month, and Hyperliquid is rapidly capturing this market share.

·More assets are set to go live: The Unit solution not only supports BTC, but also lays the foundation for the future introduction of ETH, SOL, and even real-world assets. This could make Hyperliquid the core market for cryptocurrency spot trading.

3. Hyperliquid HLP (Liquidity Vault)

HLP is a liquidity vault where users can deposit funds (primarily USDC) to act as a counterparty for derivatives exchange traders and earn a share of the trading profits.

Purpose: To provide passive income opportunities for users who do not want to actively trade, following the model of “the dealer always wins”, so that depositing users can benefit from trading activities.

·Core Features:

The funds deposited by the user will be lent to traders for leveraged trading.

The yield fluctuated, but by the end of 2024, the annualized yield reached 54% at one point.

4. Vaults (Copy Trading)

Hyperliquid offers copy trading (Vaults) functionality, allowing users to allocate funds to professional traders’ strategies for automated trading.

·Purpose: To allow ordinary users to benefit from the expertise of top traders without having to operate directly themselves.

·Core Features:

Anyone can create a Vault and manage funds, and the manager must hold at least 5% of the position and will enjoy a 10% profit share.

Users can browse the performance of different Vaults, choose investments, and achieve profit sharing.

5. HIP-1 and HIP-2 token standards

Hyperliquid has launched two innovative token standards to enhance its ecosystem:

·HIP-1: Native Token Protocol that allows users to issue custom tokens (such as PURR, a meme coin launched as a proof of concept) on Hyperliquid L1.

·HIP-2: A liquidity solution that provides market-making strategies for tokens issued by HIP-1, ensuring liquidity without relying on external platforms like Raydium (unlike Pump.FUN).

Core Features:

·HIP-1 token can be directly used for spot and perpetual contract trading on Hyperliquid.

·HIP-2 is custom-made market-making by the Hyperliquid team, leveraging its quantitative trading capabilities to provide liquidity support.

Example: PURR features a native ledger, spot order book, built-in oracles, and perpetual contract trading, demonstrating how these standards can construct a composable trading ecosystem.

The technological core of Hyperliquid

From perpetual contracts to spot trading, all of Hyperliquid’s products are built on its custom blockchain - Hyperliquid Layer1. On February 18, 2025, HyperEVM has officially launched on the mainnet.

Hyperliquid’s blockchain currently handles over 20,000 transactions per second (TPS) and supports a powerful ecosystem that includes perpetual contract trading and the BTC spot market. Based on the HyperBFT consensus, its L1 has evolved from an initial professional trading platform to a general-purpose blockchain.

HyperBFT Key Optimization

Significant increase in TPS: Previously limited by Tendermint, only supporting 20,000 orders per second, after the upgrade it can handle 200,000 orders per second.

Faster processing speed: The consensus process will not be hindered by execution, allowing transactions to be continuously ordered without waiting for the current block execution to complete.

Lower latency: confirmation times are faster and more stable, only affected by network latency.

Optimistic response: The block generation speed depends on the communication efficiency of the validators.

HyperEVM: Complete Layer-1 Capabilities

HyperEVM integrates the general EVM network into the Hyperliquid blockchain state, forming a dual VM architecture:

Native VM: Optimized for high-performance trading.

EVM Layer: Supports permissionless third-party development.

The upgrade of HyperBFT, along with the introduction of BTC spot trading, is gradually making Hyperliquid a more powerful and versatile trading platform.

How does Hyperliquid compare to…?

Hyperliquid vs. Other DEX

Fully on-chain vs. partially off-chain

Hyperliquid adopts a fully on-chain Central Limit Order Book (CLOB), while many DEX competitors (such as dYdX v4) still rely on partially off-chain order books. Hyperliquid’s solution ensures verifiability and a transparent matching engine, avoiding dark pool operations and frontrunning issues.

The dominance of the perpetual contract market

As of February 2024, Hyperliquid has accounted for 56% of the on-chain derivatives DEX trading volume. Since July 2024, its monthly perpetual contract trading volume has surpassed major competitors. In January 2025, Hyperliquid’s single-month perpetual trading volume reached $196 billion, while the total of the other four major protocols was only $60 billion.

Performance and Market Maker Priority

Hyperliquid’s custom Layer-1 and consensus mechanism (HyperBFT) enables it to handle sub-second latency and approximately 100,000 transactions per second. This is specifically tailored for high-frequency trading. Other DEXs based on general-purpose blockchains need to share block space with many other transactions, making it more challenging to maintain high throughput.

Comparison with CEX

Trading volume gap and growth trajectory

·Although Hyperliquid is still smaller than top CEXs like Binance, it has narrowed the gap in certain months, and by March 2025, its trading volume accounted for over 26% of the total trading volume displayed (compared to the top 100 spot trading pairs on Binance). This comparison highlights how a high-performance on-chain perpetual contract exchange can effectively challenge or even dominate centralized spot markets.

On-chain transparency vs. centralized control

CEXs typically have proprietary off-chain engines, which may have opacity in order routing, fees, or front-running. Hyperliquid’s fully on-chain design allows anyone to verify transactions in real-time.

Future Goal: “On-Chain Binance”

Analysts have described Hyperliquid’s bullish scenario as evolving into an on-chain Binance analogy. It has already provided perpetual contracts and a growing spot market, recently launching spot BTC, and HyperEVM is now running on the mainnet, beginning to attract a broader range of DeFi applications.

After becoming a product leader in the DeFi derivatives space, Hyperliquid’s rapid success is not only dependent on its performance; it also demonstrates its community-first philosophy.

Hyperliquid’s Community: A Trading Platform Built for Traders

Community-first token allocation

·Risk-free investor shareholding: The Hyperliquid team develops through self-funding, avoiding the allocation to private investors. This ensures that the tokens are not diluted by large venture capital shares, in stark contrast to competitors like dYdX (over 50% to investors) or GMX (30% to insiders).

Generous Airdrop:

Genesis Airdrop (31% of total supply): Distributed to 94,000 early users, averaging about $45,000 per person. This is a reward for genuine users, not speculators.

Points Program: An opaque reward mechanism suppresses Sybil attacks, favoring loyal users over bots.

76% community allocation: More than 3/4 of the $HYPE tokens are allocated to the community (airdrop + incentives), ensuring alignment with long-term growth.

Listen to users

Direct feedback builds communities of common interest. The team reached out to traders such as @HsakaTrades (500,000+ followers) and @burstingbagel through private messages, and based on the feedback, they established Vaults (e.g., Delta-neutral strategy with 20%+ annualized returns) and HLP. Since 2024, more than 50% of feature updates have come from user requests, making traders co-creators, not just users.

·Establishing trust through reliability

A reliable product can retain users in a skeptical market. Traders initially came for the airdrop, but stayed because Hyperliquid offers a 1-second deposit speed, deep liquidity of HLP, and 99.9% uptime, unlike competitors that often experience downtime.

Hyperliquid is not the first DEX to launch perpetual contracts, but it has achieved 100,000 daily transactions by optimizing trading speed (sub-second order execution), liquidity (HLP pool exceeding $540 million), and user experience (addressing withdrawal delays overlooked by competitors), successfully dispelling the criticism that “dYdX or GMX have already ‘ended’ the derivatives market.”

Aid Fund

When traders use the Hyperliquid platform, they pay trading fees, a portion of which is allocated to the Assistance Fund (AF).

This foundation continuously purchases HYPE tokens from the market, creating sustained buying pressure. As trading volume increases, more fees flow into AF, further driving the demand for HYPE. As of now, AF has accumulated 16.63 million HYPE tokens, accounting for 4.97% of the circulating supply, currently valued at approximately $267.24 million. The rapid growth of Hyperliquid is evident, with perpetual trading volume reaching $196 billion in January 2025.

What does this mean for the end users?

For HYPE holders and traders, this system creates a self-reinforcing value loop. As Hyperliquid trading activity increases (as shown in the figure below), the purchasing power of the assistance fund will also grow, ultimately benefiting long-term token users.

Self-reinforcing loop: more transactions → more fees → more buybacks → increase in token value.

User-centered product design

·Gas-free transactions: Gas fees will only be incurred when the transaction increases in status (for example, listing on the spot market or transferring to a new wallet).

· No KYC required: You can register using your email or cryptocurrency wallet (such as MetaMask).

·Intuitive interface: Designed for both beginners and advanced traders, the interface is similar to centralized exchanges (such as Binance).

·Near-instant settlement: Sub-second block time supports real-time trading.

· High throughput: Processes over 200,000 transactions per second, with no delays even during peak activity.

·Easy fund deposit: Recharge USDC via Arbitrum (future plans to support native multichain).

·Gamified design: Leaderboards and competitive rewards (e.g., airdrops for top traders) to create a highly engaging and active community.

Decentralized Path

Although Hyperliquid’s L1 was initially operated by team-run validators (to optimize performance and rapid iteration), it is gradually evolving towards a multi-validator network and distributed node framework:

·Expanded the validator set (from 16 to over 100 nodes).

·Read-only nodes: Third parties can run existing nodes to verify the state of the chain and block production.

·Long-term deployment plan: As the ecosystem develops, the team plans to introduce stronger staking and validator onboarding mechanisms, moving towards a trustless model, similar to leading proof-of-stake networks.

·Team incentive consistency: As fees currently flow to the protocol treasury and LP providers (rather than the founding team), the future compensation of the team is linked to the upcoming tokens, aligning with the long-term chain performance and decentralization goals.

Looking ahead, Hyperliquid is evolving from a focused perpetual contract DEX into a complete exchange ecosystem. With the addition of BTC spot trading, the launch of HyperEVM on the mainnet, and the expansion of the validator set, its ambitions are clear, aiming to become the “on-chain Binance.”

It combines the high performance of CeFi and the transparency of DeFi, accounting for 64.71% of on-chain perpetual contract trading volume, proving how a successful community-driven approach can drive DEX to challenge even the largest centralized platforms.

What is the secret to Hyperliquid’s success?

1. No VC, self-funded model: Ensure that users hold tokens, reduce selling pressure from private placements, and prioritize the interests of real traders over those of short-term investors.

2. User-Centric Token Distribution: Generous airdrops (31% of the supply allocated to early users, with approximately 76% allocated to the community overall), a dynamic points program to prevent Sybil attacks, and a support fund to benefit holders through token buybacks.

3. High-performance Layer-1 (HyperBFT + HyperEVM): sub-second confirmation, 100k+ order throughput and EVM compatibility, offering a combination of speed and future DeFi scalability.

4. Fully On-Chain CLOB: Transparent order matching and minimal slippage, bridging the liquidity gap that usually binds traders in CeFi.

5. One-stop service for spot and perpetual contracts: Seamless access to core markets: Newly launched BTC spot and powerful perpetual products. Users can manage spot and leveraged positions on a single platform.

6. Community-driven feature development: Direct feedback loops (user requests for Vault, HLP enhancements, and cross-chain bridging) engage traders and shape ongoing improvements.

7. Long-term decentralized vision: gradually expanding the validator set, opening read-only nodes, and a fee structure without team profits, ensuring incentive consistency and gradual disintermediation.

By combining technological excellence, community-first incentive mechanisms, and uncompromising user experience, Hyperliquid has outlined a blueprint for success in DeFi.

Its “secret” is essentially a perfect combination of institutional-level performance and grassroots user connectivity - this combination redefines on-chain transactions and paves the way for a broader future of decentralized finance.