Original title: The Secret Sauce of Hyperliquid
Original post by @stacy_muur, CuratedCrypt 0 member
Original translation: zhouzhou, BlockBeats
Editors note: Why are whales so keen on Hyperliquid? This decentralized derivatives platform has become a paradise for high-risk traders with up to 50x leverage, zero gas fees, and a transparent order book on the entire chain. According to recent blockbeat news, many whales opened high-leverage long and short orders after Trump announced the strategic crypto reserve, making millions of dollars in net profit. The platforms low cost and high leverage characteristics, coupled with the drastic market fluctuations, have attracted whales, and Hyperliquid has therefore become a new focus of contract trading.
The following is the original content (for easier reading and understanding, the original content has been reorganized):
In the history of DeFi derivatives, few protocols have been able to occupy more than half of the on-chain perpetual contract market, but Hyperliquid has done it. What is its secret?
Data shows that within 24 hours, the total trading volume of on-chain perpetual contracts was US$14.37 billion, and @HyperliquidX accounted for a staggering US$9.3 billion, or 64.71%, demonstrating Hyperliquids absolute dominance in the market.
However, most DEXs have struggled to match these aspects, often relying on:
AMM design (leading to excessive slippage for large orders, such as GMX);
Some off-chain solutions (such as dYdX v3), which will affect transparency or increase user complexity.
Hyperliquid is aware of this problem: if the user experience is poor or liquidity is insufficient, users will not migrate to the chain on a large scale. Therefore, the team is committed to providing CEX-level speed and liquidity, but completely on-chain.
Hyperliquids success proves the possibility of DEX in the face of giants such as Binance. Binances 24-hour perpetual contract trading volume is $97.22 billion, while the overall DEX trading volume is only $14.637 billion, of which Hyperliquid contributes $9.532 billion.
With Hyperliquid, DEX’s trading volume can reach 15% of Binance’s; without it, this proportion will drop to 5%, leaving only $5.105 billion. This proves the role of Hyperliquid in promoting DeFi transactions.
This performance delivers on Hyperliquid’s core promise - providing 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 (Harvard grad and former quantitative trader at Hudson River Trading) and a small team of engineers from top schools such as MIT and Caltech.
They were engaged in high-frequency trading (HFT) during 2020-2022 and turned to trustless solutions after the FTX collapse. Seeing billions of dollars disappear due to centralized custody, their goal became clear: to build a self-custodial alternative that does not sacrifice performance, and choose a VC-free, self-funded approach to ensure long-term alignment with the interests of users and traders rather than catering to short-term investor interests.
Why does CEX still dominate?
Despite the collapse of major CEXs such as FTX, user trading habits did not immediately shift to DeFi. Many traders still use centralized platforms such as Binance, not because they ignore the custody risks, but because CEX always has:
Fast and familiar interface
Deep Liquidity
Advanced trading features (stop loss orders, professional K-line, etc.)
No gas fee, no cross-chain barriers
Low threshold, convenient trading experience
2022 refers to the period after the FTX crash (November to December). 2025 data is an estimate as of March 6. Hyperliquid is aware of this shortcoming: if the user experience is poor or liquidity is insufficient, users will not migrate to the chain in large numbers. Therefore, the team is committed to creating CEX-level speed and liquidity, but completely on-chain.
Build products that prioritize user experience from day one
Lets take a look at Hyperliquids product matrix:
1. Perpetual Contract DEX
Hyperliquid’s core product 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 20 times leverage
Small market capitalization tokens can be leveraged up to 3 times
Hyperliquid was built from the ground up to offer greater openness than competing off-chain solutions and is specifically designed for high-frequency trading (HFT) needs. Features include:
Sub-second transaction confirmation
Processing 100,000 orders per second
Gas-free or near-gas-free order placement and cancellation experience
These key factors make its user experience comparable to CEX.
Advanced trading mechanism
Atomic operations: support atomic liquidation based on the latest oracle price, and distribute atomic funding rates on an hourly basis
Asset security check: The platform verifies asset security at the end of each block.
Order priority: Prioritize order cancellation and limit orders, protecting market makers from malicious liquidity influence
As of last week, Hyperliquid Perps trading volume reached $66.5 billion, almost seven times that of the second-ranked Jupiter ($9.7 billion) and more than the next 14 competitors combined ($33.6 billion).
Hyperliquid alone accounts for 66% of the total trading volume of the top 15 perpetual exchanges.
2. Spot Exchange
Hyperliquid’s spot exchange will be launched in mid-2024, initially supporting more than 20 native assets such as HYPE and memecoin.
Compared to Hyperliquid’s massive $1.06 trillion perpetual contract market, spot trading started small but is growing rapidly. As of early 2025, with key updates (especially the launch of BTC), Hyperliquid is gradually becoming a strong competitor for on-chain spot trading.
Back in mid-2024, Hyperliquid’s spot trading was limited to its own token and a few other assets (such as RAGE). This limited range of assets discouraged many professional traders, who preferred mainstream assets such as BTC rather than just speculative tokens.
Messari analyst MONK predicted in his report: If Hyperliquid adds BTC, it will completely change the situation, making it a one-stop platform covering both spot and derivatives trading, challenging centralized exchanges. This prediction was soon verified on February 15, 2025 - the Unit team launched the function of trading BTC spot directly on the Hyperliquid order book.
what does that mean?
Trading volume surges: Before BTC went online, Hyperliquids spot trading volume was only a small fraction of the $63 billion in BTC perpetual contract trading volume per month. Messari estimates that if the right assets are introduced, spot trading volume can reach 20%-30% of perpetual contract trading volume, with a potential increase of billions of dollars. With the launch of BTC spot, other DEXs have a monthly BTC trading volume of $33 billion, and Hyperliquid is rapidly seizing this market share.
More assets are coming soon: Unit’s solution not only supports BTC, but also lays the foundation for the introduction of ETH, SOL, and even real-world assets in the future. This may make Hyperliquid a core market for spot trading of crypto assets.
3. Hyperliquid HLP (Liquidity Vault)
HLP is a liquidity vault where users can deposit funds (mainly USDC), act as counterparties to traders on derivatives exchanges, and receive a share of trading profits.
Purpose: To provide passive income opportunities for users who do not want to actively trade, following the dealer always wins model, allowing deposit users to benefit from trading activities.
Core Features:
The funds deposited by users will be loaned to traders for leveraged trading.
Returns fluctuate, but at the end of 2024 the annualized return once reached 54%.
4. Vaults
Hyperliquid offers a Vaults feature that allows users to allocate funds to professional traders’ strategies for automated trading.
Purpose: To allow ordinary users to profit from the expertise of top traders without having to do it directly themselves.
Core Features:
Anyone can create a Vault and manage funds. Managers must hold at least 5% of the positions and enjoy a 10% profit share.
Users can browse the performance of different Vaults, choose to invest, and share profits.
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 on Hyperliquid L1 (such as PURR, a meme coin launched as a proof of concept).
HIP-2: Liquidity solution that provides market-making strategies for tokens issued by HIP-1, ensuring liquidity without relying on external platforms such as Raydium (unlike Pump.FUN).
Core Features:
HIP-1 tokens can be used directly for Hyperliquid’s spot and perpetual contract transactions.
HIP-2 is customized by the Hyperliquid team to provide liquidity support using its quantitative trading capabilities.
Example: PURR has a native ledger, spot order book, built-in oracle, and perpetual contract trading, demonstrating how these standards can build a composable trading ecosystem.
Hyperliquids technical core
From perpetual contracts to spot trading, all of Hyperliquids products are built on its custom blockchain - Hyperliquid Layer 1. On February 18, 2025, HyperEVM was officially launched on the mainnet.
Hyperliquids blockchain can currently process more than 20,000 transactions per second (TPS), supporting a strong ecosystem including perpetual contract trading and BTC spot market. Based on HyperBFT consensus, its L1 has evolved from an initial professional trading platform to a general-purpose blockchain.
HyperBFT key optimization
TPS has been greatly improved: Previously, due to the limitation of Tendermint, it only supported 20,000 orders per second. After the upgrade, it can process 200,000 orders per second.
Faster processing speed: The consensus process will not be blocked due to execution, and transactions can be ordered continuously without waiting for the current block to be executed.
Lower latency: Confirmation times are faster and more stable, affected only by network latency.
Optimistic response: The block generation speed depends on the communication efficiency of the validator.
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 transactions.
EVM layer: supports permissionless third-party development.
The upgrade of HyperBFT, coupled with the introduction of BTC spot trading, has gradually made Hyperliquid a more powerful and versatile trading platform.
How does Hyperliquid compare to…?
Hyperliquid vs. Other DEXs
Fully on-chain vs. partially off-chain
Hyperliquid uses 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. Hyperliquids solution ensures verifiability and a transparent matching engine, avoiding dark box operations and front-running problems.
Dominance of the perpetual contract market
As of February 2024, Hyperliquid has accounted for 56% of on-chain derivatives DEX trading volume. Since July 2024, its monthly perpetual contract trading volume has surpassed its main competitors. In January 2025, Hyperliquids monthly perpetual trading volume reached US$196 billion, while the other four major protocols totaled only US$60 billion.
Performance and Market Maker Priorities
Hyperliquids custom Layer-1 and consensus mechanism (HyperBFT) enables it to handle sub-second latency and a transaction volume of about 100,000 orders per second. This is tailored specifically for high-frequency trading. Other DEXs based on general-purpose blockchains need to share block space with many other transactions, which makes it more difficult to maintain high throughput.
Comparison with CEX
Volume gap and growth trajectory
While Hyperliquid is still smaller than top CEXs like Binance, it has closed the gap in some months, and by March 2025, it accounted for more than 26% of the total volume displayed (compared to Binance’s top 100 spot pairs). This comparison highlights how an on-chain, high-performance perpetual swap exchange can effectively challenge and even dominate centralized spot markets.
On-chain transparency vs. centralized control
CEXs often have proprietary off-chain engines that may be opaque about order routing, fees, or front-running. Hyperliquid’s fully on-chain design allows anyone to verify trades in real-time.
Future goal: Binance on the chain
Analysts describe the bullish case for Hyperliquid as developing into an on-chain Binance analogy. It already offers perpetual contracts and an expanding spot market, recently added spot BTC, and with HyperEVM now live on mainnet, it is beginning to attract wider DeFi applications.
Having become a product leader in the DeFi derivatives space, Hyperliquid’s rapid success isn’t just based on its performance; it’s also a testament to its community-first approach.
Hyperliquids Community: A Trading Platform for Traders
Community-first token distribution
No VC Ownership: Hyperliquid’s team self-funded development, avoiding private investor allocations. This ensures that tokens are not diluted by large VC stakes, in contrast to competitors like dYdX (50%+ to investors) or GMX (30% to insiders).
Generous Airdrop:
Genesis Airdrop (31% of supply): Distributed to 94,000 early adopters, averaging about $45,000 per person. This is a reward for real users, not speculators.
Points Program: Opaque reward mechanism inhibits Sybil attacks and favors loyal users over bots.
76% Community Allocation: Over 3/4 of $HYPE tokens are allocated to the community (airdrop + incentives), ensuring alignment with long-term growth.
Listen to users
Direct feedback builds communities with shared interests. The team reached out to traders like @HsakaTrades (500k+ followers) and @burstingbagel via private messages, and built Vaults (e.g. 20%+ annualized Delta-neutral strategy) and HLP based on their feedback. Since 2024, over 50% of feature updates have come from user requests, making traders co-creators, not just users.
Building trust through reliability
A reliable product keeps users in a skeptical market. Traders initially came for the airdrop but stayed because Hyperliquid offered 1-second deposit speeds, deep liquidity in HLP, and 99.9% uptime, unlike competitors that often experience downtime.
Hyperliquid is not the first DEX to launch perpetual contracts, but by optimizing transaction speed (sub-second order execution), liquidity (HLP pool exceeds US$540 million) and user experience (solving withdrawal delays that competitors ignore), it has achieved 100,000 transactions per day and successfully dispelled the doubts that dYdX or GMX has ended the derivatives market.
Assistance Fund
When traders use the Hyperliquid platform, they pay a trading fee, a portion of which is allocated to the Assistance Fund (AF).
The foundation continuously purchases HYPE tokens from the market, creating constant buying pressure. As trading volume increases, more fees flow into AF, further driving demand for HYPE. As of now, AF has accumulated 16.63 million HYPE tokens, accounting for 4.97% of the circulating supply, and is now valued at approximately $267.24 million. Hyperliquids rapid growth is evident, with perpetual trading volume alone reaching $196 billion in January 2025.
What does this mean for end users?
This system creates a self-reinforcing value loop for HYPE holders and traders. As Hyperliquid trading activity grows (as shown in the figure below), the purchasing power of the relief fund will also grow, ultimately benefiting long-term token holders.
Self-reinforcing cycle: more transactions → more fees → more buybacks → increased token value.
User-centered product design
Gas-free transactions: Gas fees are only incurred when the transaction adds state bloat (e.g., a spot listing or a transfer to a new wallet).
No KYC required: just sign up via email or a crypto wallet like MetaMask.
Intuitive Interface: Designed with both beginners and advanced traders in mind, the interface is similar to centralized exchanges like Binance.
Near-Instant Settlement: Sub-second block times support real-time transactions.
High throughput: Process over 200,000 transactions per second with no latency, even during peak activity.
Easy Funding: Top up USDC via Arbitrum (with plans to support native multi-chain in the future).
Gamification design: leaderboards and competitive rewards (for example, airdrops to top traders) to create a sticky and active community.
The path to decentralization
While Hyperliquid’s L1 will initially be run by team-operated validators (to optimize performance and iterate quickly), it is gradually moving towards a multi-validator network and distributed node framework:
Expanded validator set (from 16 to 100+ nodes).
Read-only nodes: A third party can already run a node 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 alignment: Since fees currently flow to the protocol treasury and LP providers (rather than the founding team), the team’s future compensation is pegged to the upcoming token, thereby aligning with long-term chain performance and decentralization goals.
Looking ahead, Hyperliquid is evolving from a dedicated perpetual contract DEX to 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 ambition is clear. Its goal is to become “Binance on the chain.”
It combines the high performance of CeFi and the transparency of DeFi, and has accounted for 64.71% of the 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: ensures that users own tokens, reduces private selling pressure, and prioritizes the interests of real traders rather than short-term investors.
2. User-centric token distribution: generous airdrops (31% of the supply goes to early users, ~76% overall to the community), a dynamic points program to prevent Sybil attacks, and a help fund to benefit holders by buying back tokens.
3. High-performance Layer-1 (HyperBFT + HyperEVM): sub-second confirmation, 100k+ order throughput, and EVM compatibility, providing speed and composability for future DeFi expansion.
4. Fully on-chain CLOB: Transparent order matching and minimal slippage, bridging the liquidity gap that typically keeps traders tied to 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 one platform.
6. Community-driven feature development: Direct feedback loops (user requests for Vault, HLP enhancements, cross-chain bridges) allow traders to participate and shape continuous improvements.
7. Long-term decentralization vision: gradually expand the validator set, open read-only nodes, and have a fee structure without team profits to ensure incentive consistency and gradual trustlessness.
By combining technological excellence, community-first incentives, and uncompromising user experience, Hyperliquid has created a blueprint for DeFi success.
Its “secret sauce” is essentially the perfect combination of institutional-grade performance and grassroots user connectivity — a combination that redefines on-chain transactions and paves the way for a broader future of decentralized finance.
