Huobi Growth Academy | Hyperliquid Deep Research Report - The Rise of the New Generation of On-Chain Derivatives "Liquidity Base"

1. Team Background and Organizational Structure

The rise of Hyperliquid largely stems from its unique team composition and organizational culture. Unlike many crypto projects that rely on large teams and massive funding, Hyperliquid has taken a "lean, efficient, and technology-driven" path since its inception. Its core competitiveness lies in the high execution power of a small team, an engineering mindset, and a commitment to community ownership.

Hyperliquid's founder, Jeff Yan, has a distinct background in quantitative analysis and systems engineering. He graduated from Harvard University with a degree in Mathematics and Computer Science and previously worked as a quantitative trader at Hudson River Trading (HRT), a leading high-frequency trading firm on Wall Street. HRT is known for its extreme demands on technical latency and system performance. In this environment, Jeff gained a profound understanding of ultra-low latency matching systems, quantitative model construction, and market microstructure. In 2018, he entered the crypto industry, initially exploring how to transfer traditional high-frequency trading experience to a decentralized environment. By 2022, he officially established Hyperliquid with a clear mission: to create a high-performance trading platform that combines high-frequency trading with on-chain mechanisms. Unlike many crypto entrepreneurs, Jeff is not keen on business development or capital operations; he firmly believes that only by concentrating resources on product development and system iteration can one truly stand out in a competitive market. This technology-centric entrepreneurial mindset has set the developmental tone for Hyperliquid and defined the overall team ethos—quantitative thinking, systems engineering orientation, and a relentless pursuit of extreme performance.

The size of Hyperliquid's team is extremely streamlined. According to public reports and community estimates, the core team consists of only about 11 people, yet it supports a platform with daily trading volumes often exceeding $10 billion. Compared to traditional fintech companies with research and operational teams numbering in the hundreds, this scale is almost unbelievable. This "small team, high output" model is also reflected in financial metrics. According to community statistics and third-party research from August 2025, Hyperliquid's annual revenue per capita exceeds $100 million, with total revenue reaching the billion-dollar level, earning it the title of "one of the highest human efficiency companies in the world." This astonishing human efficiency not only showcases the team's execution power but also reflects the high level of automation and stability of its underlying systems. Order matching, risk management, and clearing mechanisms rely almost entirely on automated system operations, allowing team members to focus primarily on protocol iteration and feature expansion rather than daily maintenance and manual intervention. This model reduces marginal labor costs, enabling the team to achieve maximum market coverage with minimal scale. More importantly, this high human efficiency does not come at the expense of security. Hyperliquid's matching engine and on-chain mechanisms have withstood tests in multiple extreme market conditions, operating stably with user assets secure and without major incidents. This has further convinced the market that even a small team can achieve trading infrastructure comparable to traditional giants through exceptional engineering capabilities and mechanism design.

In addition to the founder's background and team size, Hyperliquid's organizational culture is also one of its unique advantages. First, the team adheres to the principle of "better to have less than more" in recruitment. Members mostly come from top academic and financial institutions such as MIT, Caltech, and Citadel, possessing extremely high professional backgrounds. Rather than rapidly expanding through a large workforce, Hyperliquid prefers to maintain efficient execution through the deep involvement of core members. Secondly, the team demonstrates a strong set of values in capital selection. They explicitly reject external VC investment, insisting on "not taking VC." In the crypto industry, this choice is highly symbolic. Many projects obtain resources through large-scale financing in their early stages, often leading to governance and value capture rights skewed towards capital providers. Hyperliquid, on the other hand, promotes development through self-funding and endogenous growth of the protocol, ensuring that value capture belongs to the community rather than capital. This not only enhances users' sense of belonging to the platform but also establishes a differentiated positioning at the narrative level.

In terms of governance, Hyperliquid continues this logic. The platform's transaction fees and revenues are returned to the HLP protocol treasury and ecological fund, with no profit extraction by the team. This arrangement allows users to feel the transparency and fairness of the platform's operations, reducing concerns about "centralized arbitrage." As the community's voice in governance and ecological construction strengthens, Hyperliquid gradually forms a cultural atmosphere of "users as owners." This culture is a significant reason for quickly gaining user trust and builds a long-term community moat for the platform.

In summary, Hyperliquid's team and organizational structure exhibit three distinct characteristics: the founder's background determines the gene: the accumulation of quantitative and high-frequency trading provides the platform with inherent engineering and performance advantages; a small team achieves high human efficiency: a team of just over ten supports trading volumes in the billions, resulting in extremely high capital and labor efficiency; an organizational culture emphasizing community ownership: rejecting VC and emphasizing transparent distribution enhances user trust and participation. This organizational model breaks the traditional perception that "scale is necessary for success," proving that in the DeFi space, small and refined, user-centric teams can also grow into industry leaders. The story of Hyperliquid's team is not only an important footnote to its success but also provides a thought-provoking paradigm for future entrants: in the world of open finance, what is most scarce is not capital and labor, but extreme engineering capability, clear values, and long-term consistent institutional design.

2. Product Features and Trading Models

Hyperliquid's rapid rise in a short time can be attributed not only to the team's engineering capabilities and organizational culture but also to its product architecture and trading models, which are key to building market barriers. In the DeFi derivatives space, the vast majority of protocols face a dilemma of "insufficient performance and security trust," while Hyperliquid successfully bridges the gap between performance and decentralization through its self-developed dual-engine architecture, fully on-chain order book, innovative HLP protocol treasury, and strict leverage risk control system. This enables the platform to provide a trading experience close to centralized exchanges (CEX) while maintaining the transparency and openness of DeFi in its mechanisms, making it one of the only platforms that truly combines CEX speed with DeFi security.

Hyperliquid's underlying technology architecture consists of the HyperCore and HyperEVM dual engines, corresponding to performance and openness, respectively. HyperCore is the platform's core matching and trading system, responsible for executing spot and perpetual contracts. Its performance metrics are close to those of traditional centralized exchanges, with a median matching latency of about 200 milliseconds and throughput reaching hundreds of thousands of TPS. This means that high-frequency traders and institutional investors can execute complex strategies on-chain without losing their competitive edge due to latency and slippage. HyperEVM, on the other hand, is an environment compatible with the Ethereum Virtual Machine, supporting on-chain contracts and ecological expansion functions. It ensures that Hyperliquid can maintain high performance while still achieving composability with the Ethereum ecosystem and broader DeFi protocols. Through HyperEVM, Hyperliquid can quickly expand into more financial applications such as lending, liquid staking, and asset issuance, forming a complete on-chain financial closed loop. This "dual-engine" model is designed to balance performance and verifiability: HyperCore focuses on extreme speed and stability, while HyperEVM ensures the system's openness and ecological diversity. It is this architectural innovation that allows Hyperliquid to achieve the goal of "CEX experience + DeFi security" ahead of others.

In terms of trading models, Hyperliquid has chosen a path that is entirely different from mainstream AMM models—fully on-chain order book (CLOB). Traditional decentralized exchanges mostly rely on AMM (automated market makers), which, while achieving permissionless liquidity, have inherent limitations in depth, slippage, and high-frequency strategies. Hyperliquid, however, has completely moved the order book and matching logic on-chain, allowing users' order placements, cancellations, matches, and settlements to be fully verifiable. This design brings two advantages: on one hand, it significantly enhances fairness and transparency. All orders and matching results are recorded on-chain, avoiding dark box operations or market maker manipulation. On the other hand, it opens the door for institutional users and high-frequency traders. These users are familiar with order book-based trading models and rely on complex order and cancellation strategies to manage risks and arbitrage. The on-chain order book environment provided by Hyperliquid meets their dual demands for depth, speed, and programmability, allowing them to execute complex strategies as if on a CEX without bearing custody risks.

In DeFi derivatives trading, providing stable liquidity and clearing capabilities has always been a challenge. Hyperliquid innovatively addresses this pain point through the HLP (treasury) mechanism. HLP plays three roles: liquidity provider: HLP undertakes the platform's main market-making functions, ensuring stable depth for buyers and sellers; risk buffer: in the event of user losses or severe market fluctuations, HLP acts as a systemic risk hedging pool, absorbing liquidation losses and thus avoiding the common ADL (automatic liquidation) seen in traditional exchanges. This way, profitable users will not be forcibly liquidated due to systemic risks; revenue-sharing mechanism: all users who deposit funds into HLP can share in the platform's fee income and funding rate returns.

The greatest significance of this design lies in democratization. In CEX, market-making and clearing are typically controlled by a few privileged market makers, and ordinary users cannot participate directly. In Hyperliquid, every depositor can become part of the market maker and share in the market growth dividends. In the long run, this not only enhances user stickiness but also makes the platform's risk management more resilient.

Leverage and risk control are core to the derivatives market. While Hyperliquid offers high leverage, it has established a dynamic risk control mechanism. The platform supports a maximum leverage of 40-50 times, meeting the needs of professional traders. However, in low market cap tokens or large positions, the system will actively lower the leverage limit to avoid systemic risks caused by individual extreme positions. The calculation of funding rates also reflects the platform's robustness. Unlike some platforms that calculate based on internal prices or funding pool conditions, Hyperliquid's funding rates are based on external oracle prices, ensuring price anchoring to the real market and avoiding internal manipulation. The frequent settlement mechanism of rates (usually every 8 hours) further guarantees the market's dynamic balance. Through this series of mechanisms, Hyperliquid maintains the attractiveness of high-leverage trading while ensuring that systemic risks are controllable and user experiences are predictable. This establishes a relatively solid trust bridge between whales and retail users.

Overall, Hyperliquid's products and trading models demonstrate a high level of systems engineering thinking: through HyperCore + HyperEVM dual engines, it achieves a balance between performance and openness; through a fully on-chain order book, it provides institutional-level fairness and depth; through the HLP protocol treasury, it democratizes market-making and clearing functions; through leverage and risk control systems, it attracts high-frequency and professional users while maintaining platform safety and stability. This complete product system not only addresses the long-standing pain points of decentralized derivatives but also shapes Hyperliquid's unique competitive advantage. It allows users to experience a nearly seamless transition between CEX and DeFi while establishing long-term trust and stickiness through transparent systems and revenue-sharing mechanisms. For this reason, Hyperliquid has quickly stood out in a fiercely competitive space, becoming the most representative "liquidity base" today.

3. Governance and Institutional Design: The Cornerstone of User Trust

Another core competitive advantage of Hyperliquid lies in its governance and institutional innovations, which achieve openness, scalability, and rapid iteration. Since its establishment, the project has adopted a mechanism similar to Ethereum EIP, namely Hyper Improvement Proposal (HIP), as the foundational framework for community consensus and product iteration. Through HIP, Hyperliquid not only addresses liquidity cold starts and asset listings but also provides an institutionalized path for the expansion of the derivatives market, significantly enhancing the platform's ecological diversity.

The launch of HIP-1 marked an important first step for Hyperliquid in governance and institutional design. Through this mechanism, any project party only needs to pay a certain amount of HYPE token fees to create their own token on the platform and quickly launch a spot market. This mechanism breaks the monopoly of "listing rights controlled by exchanges" in CEX and avoids the bottleneck of relying on external liquidity guidance seen in traditional DEX. In other words, HIP-1 standardizes and regulates the act of "listing," allowing project parties to enter the market in a completely permissionless environment while significantly reducing cold start costs. If HIP-1 solves the question of "how to list," then HIP-2 further addresses the challenge of "how to maintain market depth in the early stages." In traditional markets, new assets often lack proactive liquidity from both buyers and sellers upon listing, leading to high slippage and unstable trading. Hyperliquid introduces automated market-making services (Hyperliquidity) through HIP-2, providing basic buying and selling depth for new projects. This not only enhances user experience but also helps new assets gain market recognition more quickly. It is worth noting that this automation is not merely liquidity incentives but is based on systematic algorithms and reasonable allocation of funding pools, ensuring the sustainability of market-making.

HIP-3 can be regarded as a landmark innovation in Hyperliquid's governance and institutional design. According to this proposal, any Builder can obtain the right to deploy perpetual contract markets by staking 1 million HYPE and participating in a Dutch auction. More importantly, Builders can enjoy up to 50% of the fee income share in the new market and customize trading parameters and rates. This mechanism greatly unleashes the creativity of the community, transferring the supply rights of perpetual contract markets from the official team to ecological participants. The potential impact of HIP-3 is profound: it allows Hyperliquid to quickly expand into long-tail assets such as RWA (real-world assets), indices, commodities, foreign exchange, and even Pre-IPO stocks, forming a differentiated product supply compared to CEX; it filters out builders with long-term investment and financial strength through high staking thresholds and auction mechanisms, avoiding the proliferation of low-quality markets; it binds fee-sharing with governance, providing the community with clear economic incentives when expanding new markets.

Overall, the HIP series proposals demonstrate the logic of Hyperliquid's institutional design: first, reduce entry barriers through open listing and automated market-making, and then achieve decentralized supply and scalable expansion through the Builder mechanism. This governance framework not only addresses the growth bottlenecks of traditional DEX but also shapes the long-term institutional foundation for Hyperliquid's evolution.

In decentralized finance, user trust is fundamental to the platform's long-term development. Hyperliquid's core matching logic and capital flow mechanisms may appear to have a certain "centralized processing" color to the outside world, but it has still established strong user trust in a short period. This trust formation stems from the combined effects of performance, institutional transparency, and narrative values. First, performance and experience are the most direct attractions. Hyperliquid provides trading speeds and depths close to centralized exchanges, with matching latencies as low as 200 milliseconds, sufficient to meet the needs of high-frequency traders and institutional users. Users experience a nearly seamless transition on-chain as if they were on a CEX, yet without bearing the risks of centralized custody. Secondly, transparency and non-custodial arrangements give users a greater sense of security. The platform does not have a profit extraction mechanism; all fee income is returned to the HLP protocol treasury and ecological fund. User assets are always under their control, and all transaction records are verifiable on-chain, contrasting sharply with the "black box" nature of traditional exchanges. Thirdly, community ownership forms the trust foundation at the value level. Hyperliquid has consistently rejected VC investment, does not transfer benefits to external capital, and insists that "users are owners." This narrative not only alleviates concerns about "capital versus user" conflicts but also psychologically positions users as co-builders and long-term beneficiaries of the platform.

Moreover, the whale effect amplifies the transmission of trust. Notable whale James Wynn has traded on the platform with positions worth hundreds of millions of dollars and high leverage, generating extremely high returns. Such transparent and visible success stories significantly enhance ordinary users' trust and attract more capital inflow. Finally, the deflationary and incentive mechanisms reinforce the expected value of the token. The HYPE token is not only a tool for governance and staking but also provides fee discounts, with part of the platform's revenue used for token buybacks and burns. This design leads users to believe that there is a direct binding relationship between platform growth and token value, making them more willing to hold and participate long-term.

In summary, Hyperliquid's trust flywheel is driven by the combined forces of technical performance, transparent systems, community ownership, demonstrative effects, and deflationary mechanisms. This composite trust structure has allowed it to quickly overcome the controversy of "trust like CEX" and instead form a unique competitive advantage.

4. Market Performance and Competitive Landscape

By 2025, Hyperliquid has become the absolute leader in the DeFi perpetual contract market, with a market share stabilizing between 70-80%. Its average daily trading volume reaches hundreds of billions of dollars, far exceeding other decentralized derivatives platforms and matching the scale of some medium-sized centralized exchanges. According to DefiLlama data, Hyperliquid's annualized fees reach $1.345 billion, with fees over the past 30 days amounting to $110.26 million, and cumulative fees reaching $660.98 million. Meanwhile, annualized revenue stands at $1.251 billion, with revenue over the past 30 days at $102.55 million and cumulative revenue at $636.46 million. This scale makes Hyperliquid a veritable "on-chain liquidity base." In terms of capital volume, Hyperliquid's TVL exceeds $2 billion, reflecting user asset accumulation and protocol security. Its token HYPE once reached a market capitalization of $16 billion, with a fully diluted valuation (FDV) exceeding $46 billion. Such high valuations not only reflect market recognition of its business model but also indicate that investors generally view its long-term development potential positively. Hyperliquid's speed and user experience are now comparable to centralized giants like Binance, while its non-custodial and community ownership designs help it avoid the trust and regulatory crises associated with CeFi models. In the context of declining global user trust in CEX, this differentiation becomes Hyperliquid's strategic advantage. However, as regulations tighten in the future, how Hyperliquid balances "no KYC, cross-chain freedom" with "compliance requirements" will become a challenge it must face for continued expansion.

In the DEX space, Hyperliquid's advantages are also quite evident: compared to AMM-based DEXs (like Uniswap), Hyperliquid offers more professional order book trading tools and deeper liquidity, attracting institutional and high-frequency users. Compared to order book-based DEXs like dYdX V4, Hyperliquid's self-developed high-performance L1 and HLP model demonstrate stronger performance and resilience, avoiding performance bottlenecks associated with reliance on external chains. Overall, Hyperliquid has established a de facto monopoly position in the DeFi perpetual contract market. It is both a challenger to CEX and a surpasser of other DEXs. Hyperliquid's governance and institutional design have achieved a full-process openness from listing, market-making to derivatives market expansion through the HIP series proposals; its user trust stems from the combined flywheel of performance, transparency, and values; its market performance proves the success of this model. In 2025, it is not only the leader in DeFi perpetual contracts but also the prototype of "on-chain liquidity infrastructure." However, regulation and governance remain key challenges for the future. For other DEXs, Hyperliquid's experience indicates that only by combining technical performance, institutional innovation, and value narratives can one establish a long-term moat in fierce competition.

5. Risks and Challenges

Although Hyperliquid has achieved a leap from a small team to a market leader in a short time, any rapidly growing financial infrastructure inevitably faces a series of risks and challenges. For Hyperliquid, these challenges will not only determine whether it can maintain its leading position but also affect the overall landscape of the DeFi derivatives space.

The primary challenge comes from the uncertainty of the global regulatory environment. Hyperliquid's model emphasizes no KYC and free cross-chain capital flow, which is advantageous for user experience and market expansion but may pose potential risks in terms of compliance. Regulatory agencies worldwide are increasingly focusing on the leverage risks of crypto derivatives, anti-money laundering requirements, and cross-border capital flows, and may introduce mandatory registration or identity verification requirements in the future. If Hyperliquid faces regional restrictions, it could impact its user growth and liquidity. Unlike CeFi platforms, DeFi protocols find it challenging to resolve compliance issues through traditional licensing paths; how to balance regulatory compliance with the spirit of decentralization will be a long-term challenge for Hyperliquid.

While Hyperliquid advocates "users as owners" and achieves democratic governance through HIP proposals and the HLP treasury, there remains a risk of governance centralization in practice. For example, during the JELLYJELLY manipulation incident, the Hyper Foundation had to intervene in governance and market, revealing that the ecosystem still relies on the core team's final decision-making. This phenomenon exposes a paradox: decentralized institutional designs often still require centralized forces to backstop when faced with complex governance or malicious attacks. How to further optimize the governance mechanism for validators and ensure a balance of interests between Builders and users will directly impact Hyperliquid's long-term sustainability. Hyperliquid's high-performance matching engine and cross-chain bridge design are competitive advantages, but they also harbor systemic risks. In extreme market fluctuations or large-scale liquidation events, cross-chain deposits, liquidations, and capital settlements may come under immense pressure. Any delays or failures could affect user trust. Furthermore, while the HLP treasury bears most of the risks, its capacity to absorb extreme losses still has limits. Enhancing system resilience without compromising user experience is a direction Hyperliquid must continuously invest in.

Hyperliquid's revenue is highly dependent on market activity, especially the leverage demand for derivatives trading. During bull markets, trading volumes and fee revenues can grow rapidly, but in bear market conditions, a decline in trading activity may lead to a significant drop in protocol revenue. If the platform cannot maintain sufficient revenue distribution during downturns, it may weaken the enthusiasm of HLP depositors, subsequently impacting market depth and overall ecological stability. The cyclical risks of the business model need to be partially hedged through diversified products (such as RWA, lending, etc.). Additionally, Hyperliquid's brand narrative is built on "rejecting VC and community ownership," which is an important asset for its differentiation. However, if the team is questioned about hidden profits or if governance structures encounter controversies over opacity, it could quickly undermine user trust in the narrative. Moreover, as the whale effect intensifies, some users may worry that Hyperliquid relies too heavily on large funds, potentially causing market volatility and uneven profit distribution. If such cognitive risks are not managed properly, they could lead to community rifts.

Summary: Regulation, governance, system stability, market cycles, and brand perception are the five major sources of risk for Hyperliquid's future. These challenges will not diminish its current leading position but will determine whether it can become a true "cross-chain liquidity infrastructure."

6. Insights for DEX Marketing

Hyperliquid's successful experience extends beyond the product level; it has also formed a highly instructive model in narrative and institutional aspects. For those looking to rise in the decentralized trading space, Hyperliquid's approach offers clear insights, including: 1. Narrative-driven: user ownership and value return. Hyperliquid consistently emphasizes "rejecting VC, users as owners," and implements this through fee sharing and HLP revenue sharing. This narrative not only enhances users' sense of belonging but also builds strong community stickiness. For any DEX, narrative is not merely about promotion but a unity of systems and practices: only when users genuinely feel the dividends brought by the platform's growth can the narrative endure. 2. Product-driven: balancing performance and experience. Hyperliquid's core competitiveness comes from the "dual-engine architecture + fully on-chain order book." This indicates that in the DEX field, users will not lower their experience expectations due to decentralization. On the contrary, only when performance approaches that of CEX will users be willing to use it long-term. Therefore, for newcomers, marketing cannot merely rest on the label of "decentralization" but must combine "high performance, low latency, and transparent verifiability" to convey the product selling point of "both fast and secure." 3. Community-driven: whale effect and retail diffusion. Hyperliquid's growth path first drives trading volume and liquidity through whale users, then achieves retail diffusion through partnerships with wallets like Phantom. This "top-down + bottom-up" dual-driven approach provides a reusable framework. For DEX, the initial phase can establish market trust by showcasing successful cases from large holders, while in the medium to long term, it needs to deeply integrate with entry-level applications (wallets, aggregators) to bring retail users into the ecosystem. 4. Mechanism-driven: open growth and revenue-sharing logic. The success of HIP-3 indicates that opening up the builder ecosystem is an effective way to expand the market. Through high-stakes staking and fee sharing, Hyperliquid has delegated market creation rights to the community, achieving scalable expansion on the supply side. For marketing, this logic suggests that DEX should incorporate "institutional design" itself as part of the growth narrative, emphasizing that the platform belongs to everyone, not just a few. 5. Brand-driven: from DEX to "liquidity base." Hyperliquid no longer positions itself as a single exchange but emphasizes "cross-chain liquidity infrastructure." This positioning gives it greater strategic imagination. For any DEX, the key to brand marketing is to break out of the limitations of "single-point applications" and build a larger narrative, such as "on-chain settlement layer" or "cross-chain asset gateway," to gain strategic premiums beyond a single product.

The insight from Hyperliquid is that the five dimensions of narrative, product, community, mechanism, and brand must work in synergy; marketing is not a singular action but a unified output of systems, products, and strategy.

7. Conclusion

The story of Hyperliquid is an important footnote to the new phase of decentralized finance. Starting from a team of fewer than twenty people to now holding a 70-80% share in the decentralized perpetual contract market, the driving forces behind it can be summarized in three points: engineering culture, institutional design, and narrative values.

On the engineering level, Hyperliquid has built a self-developed high-performance chain and fully on-chain order book with a lean team, proving that small teams can also surpass traditional giants in systems engineering; on the institutional level, through the HIP series proposals and the HLP protocol treasury, it has achieved a unity of market expansion, risk management, and revenue sharing; on the narrative level, by rejecting VC and emphasizing community ownership, it has constructed a sense of belonging and value recognition among users. These three elements together form Hyperliquid's "trust flywheel," enabling it to not only become the leader in DeFi derivatives but also the prototype of a new generation of on-chain financial infrastructure. Looking ahead, the challenges Hyperliquid must face are also clear: tightening regulatory environments, risks of centralized governance structures, system resilience in extreme market conditions, and the impact of market cycles on revenue models. However, the paradigm it has established has already provided a reference for the industry. For future entrants, Hyperliquid's experience indicates that in the fierce competition of decentralized trading, only by combining performance advantages, institutional innovation, and value narratives can one truly build a long-term moat.

In a sense, Hyperliquid is not just a DEX; it has taken a crucial step toward becoming a "cross-chain liquidity base." Its emergence signifies that the future of DeFi will no longer be a collection of single applications but will gradually evolve into a global financial network that is performance-comparable to CEX, institutionally transparent, and community-governed.