A Deep Dive into the Success and Concerns of Hyperliquid

Author: Shisi Jun

1. Research Background

The author has recently studied almost all the Perps (perpetual trading platforms) available on the market. The hype market's fivefold growth once again proves that my judgment during the initial research last year overlooked its core value.

Moreover, recently aster, antex, dydxV4, and even Sun Ge have entered the field, causing the Perps track to shake, and the sunPerps are gradually leading the Perps track into an explosive period.

In addition, major exchanges are competing to launch hype and the perpetual trading capabilities on their platforms. Yesterday, it was reported that Metamask has become another major wallet platform after Phantom, planning to integrate Hyper's perpetual trading, and Circle has also become its validator, breaking the core concerns of decentralization. Hyperliquid itself is also striving to enhance its openness, especially with the gradual rollout of hyperEVM, hip2/3/4.

1.1 Three Key Elements of the New Track

At this point, Perps can be said to possess the three key elements of a new track.

In fact, if we review any significant wave of historical trends, we can see that it often involves new leading platforms, new wealth opportunities, and new narrative backgrounds. The convergence of trends brings peaks, while subsequent platform airdrop strategies, the gradually increasing complexity of platforms, and the decline in user perception freshness eventually lead to troughs.

This process has already gone through many waves, with typical scenarios as follows. Each module has been analyzed in previous articles on "Shisi Jun," and interested readers can look them up:

• The ICO frenzy of 2017 corresponded to CEX platforms. The basic demand was undeniable, and many are still thriving today.
• The DeFi summer of 2021 corresponded to platforms like Uniswap, lending, and stablecoins, similar to the above.
• The NFT boom of 2022 had protocols that existed long before, but it peaked due to OpenSea, rooted in pricing through trading and spreading based on price. Its decline also stemmed from arrogance, leading to a death spiral of price chasing due to airdrop strategies and royalties, which was self-inflicted.
• The inscription craze of 2023 corresponded to the Unisat platform, whose decline was due to shortsightedness, focusing solely on asset issuance during its hottest phase without developing applications, resulting in a too-short narrative lifecycle. When new narratives emerged, RWA and Perps captured attention, making it difficult for recent Alkanes and BRC2.0 to regain popularity, which was also self-inflicted.
• The meme and corresponding pump platforms of 2024, along with this year's dark horse Axiom, have made this wave unusually persistent. This is due to the inherent trading advantages of the chain itself, and the continuous influx of trading-oriented crowds, coupled with new users brought by the wave of compliance, extending the lifecycle.
• Finally, in 2025, both RWA (focusing on stocks) and Perps (led by Hyperliquid) will coexist.

2. Interpretation of Key Development Steps of Hyperliquid

2.1 Current Development Status

Objectively speaking, until now, the system is still in a relatively centralized state, theoretically capable of pulling the plug and changing the status. Moreover, there are hacker funds involved, which is a significant bottleneck for many exchanges in terms of compliance and heat access. However, its data is quite contradictory.

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

It has accumulated over $30 trillion in trading volume, with an average daily trading volume approaching $7 billion.

Currently, it supports Perps trading for over 100 assets.

Looking at its data, it can only be said to be exceptionally good, and although the user base doesn't seem large, they are the most capable of generating funds.

2.2 Major Updates and Interpretations

The specific timeline is as follows:

• March 25: Opened the connection between HyperCore and HyperEVM, theoretically allowing users to trade core tokens from EVM (limited to trading at that time).
• April 30: Launched the read precompiled function, enabling HyperEVM smart contracts to read states from HyperCore.
• May 26: Halved the block duration to 1 second, increasing HyperEVM's throughput.
• June 26: Updated HyperEVM blocks, removing the previous sorting of only published orders to improve integration with HyperCore.
• July 5: HyperEVM updated a new precompiler named CoreWriter, allowing HyperEVM contracts to write directly to HyperCore, including placing orders, transferring spot assets, managing treasury bonds, and staking HYPE.
• Recently, there have also been Builder Core and Hip4, entering the data prediction market. This unexpected move indicates that the founders have a unique perspective on industry pain points, which often leads to polarization of the platform.

How should we understand this series of updates?

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

HyperEVM

Especially with the EVM-based dual-chain architecture, the logic is quite outrageous. It adds a large number of precompiled contracts and integrates them with HyperCore without opening (deploying) HyperCore, theoretically enabling wallet (Phantom, Metamask) and exchange integrations, allowing for EVM trading operations to execute Core's order asset buying and selling capabilities.

The official has a diagram that reflects the positioning of HyperEVM in the system.

It can be seen that both writing and reading of HyperCore and HyperEVM are confirmed by HyperBFT, and the specific confirmation mechanism of validators has not been disclosed, with no cross-chain bridges or delayed synchronization.

The dynamics observable through on-chain transactions indicate that HyperEVM can influence HyperCore through system contracts (0x333…3333, CoreWriter.sendAction(…)), allowing for order placement, liquidation, and lending operations.

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

• User Data------Positions, Balances, and Vault Information
• Market Data------Mark Prices and Oracle Prices
• Staking Data------Delegation and Validator Information
• System Data------L1 Block Count and Other Core Metrics

The essence of the information is received by the EVM's system contracts, generating corresponding receipts or events for recording. In the EVM, the precompiled contract (0x000…0800) can call 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 without manual intervention, maintaining a narrow price spread of about 0.3%.

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

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

Builder Core

This is a mechanism with significant future value, allowing DeFi builders (developers, quant teams, aggregators) to charge additional fees as service income when placing orders on behalf of users. The application scenarios are clear, representing a move to open profits and welcome ecological co-construction.

• Quantitative Strategy Custody, where quant teams help users place perp position orders and charge management fees through builder fees, forming a "revenue sharing + builder fee" composite profit model.
• Aggregator/Trading Routing, for example, 1inch, Odyssey, etc., integrating perp trading services on Hyperliquid, can charge builder fees as routing income models.

The initial launch has already brought over ten million dollars in dividend income to some projects, demonstrating the effect of hyper capital deeply embedding into the platform level.

In fact, opening depth is not just something Hyper does; Uniswap V4 also aimed to do this through hooks, but V4 didn't take off, as most users still prefer V2 and V3.

Perhaps this is the influence of having fewer historical burdens and strong 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 have become even rarer under this year's wave of compliance.
• The demand for high-leverage, high-transparency advanced trading users, the former brings exposure from KOLs, while the latter is often overlooked by the market's existing ideologies, hence catching many CEXs off guard.

Secondly, the team background itself is a major advantage; its biggest strength is its small size, leading to high communication efficiency and reduced wear and tear. With an overall team of just over a dozen, excluding 3-4 product operation BD and front-end and back-end personnel, it essentially relies on just 3-4 people to create a high-performance chain with 20 WTPS.

Compared to many traditional large companies' blockchain teams, which often produce a lot of internal drama, this is quite remarkable.

In its background, it started as a market maker in 2020, which provided a solid initial depth. You can also sense its matching logic in many details, which is not merely a sequential settlement based on time and amount as in other order book systems.

However, there is insufficient data, and I will supplement it when doing comparative analysis of multiple Perps in the future.

Then there is the trend.

Generally, projects need to adapt to the market, but when a platform's popularity peaks, it can make the market adapt to it.

Hyperliquid is currently enjoying such treatment.

On one hand, it stems from the openness in the updates above, allowing various ecosystems to have entry space. Compared to many past platforms that often thought of completing everything themselves and reaping all the benefits, openly criticizing OpenSea while also creating a mandatory royalty system that forces the market to follow the leader, each time incurs fixed high costs, interfering with the flow of goods and affecting the real pricing of the market, ultimately becoming a family heirloom.

In contrast, in the hype, it has opened up EVM and various DEX Peps APIs, so we quickly see a plethora of derivatives in the market.

Hyperliquid's generosity is also evident in its airdrops; from the beginning, it has been unable to pursue a compliance route.

Thus, it will not attempt to embrace the so-called expectations of going public, naturally opening up profits. By using the Hlp mechanism to stake HYPE back, it can reinvest profits, allowing the official token to disperse and gain the market's rare decentralized evaluation and reputation.

Its openness has attracted market crowds, with Phantom first integrating its Perps capabilities from the perspective of a decentralized wallet, which is not particularly difficult, mainly involving substantial adaptation and development costs. Recently, there have been reports that Metamask is also integrating.

This also shows that those decentralized wallets that have not updated for over half a year, after missing the inscription opportunity, now understand the importance of capturing annual narratives.

Finally, it has also pushed to introduce giants like Circle as validators, bringing decentralized security and filling its decentralization gap, thus providing a chance for a highly compliant CEX platform to integrate.

3.2 Now, Let's Talk About the Disadvantages

After overcoming the most challenging initial phase, the compliance issue arises. Even pure DEXs like Uniswap are embracing compliance, let alone users who have made their fortunes with Hyperliquid in Europe and America? If it is deemed non-compliant or faces other serious accusations, existing CEX/wallet collaborations will be severed, and former allies will part ways.

Additionally, this system will also face the complexity of development challenges in the future. Most projects become increasingly complex, making it difficult to simplify and return to first principles, ultimately causing novice users to struggle and lose fresh blood.

Finally, there is the risk of single points of failure. Now claiming to achieve 20 WTPS, if multiple global platforms integrate, it will lead to numerous inconsistencies, putting immense pressure on the core HyperCore module. This high-performance construction is not achieved overnight. The official background as a market maker may not withstand the traffic; if multiple liquidation issues arise due to downtime (similar to the short squeeze incident in March), the hard-earned reputation could be fundamentally fragile.