Why Hyperliquid is Winning

In just two years, Hyperliquid has quickly positioned itself as a leading force in the crypto derivatives market, emerging as one of the most actively traded perpetual DEXs. 

Setting itself apart in the blockchain landscape, Hyperliquid has taken a product-first approach, fostering organic growth without heavy reliance on incentives and maintaining financial independence as a strictly self-funded team. It’s processed $21B in volume this week alone and has 3x’d its total share of perpetuals volume this year, climbing from ~11% in December 2023 to 33% this week.

All the while, Hyperliquid has been running a points program that will soon culminate in the highly anticipated HYPE token TGE, laying the foundation for its future decentralization, the addition of EVM compatibility, and community governance. 

Let’s take some time to explore what makes Hyperliquid unique, methods for gaining exposure to the upcoming TGE, and its planned expansion once HYPE is live 👇

What Makes Hyperliquid Unique?

Hyperliquid’s unique feature set goes beyond traditional derivatives, offering thoughtfully built tools for token creation, liquidity management, seamless user experience, and yield generation.

HIP-1: A Native Standard for Spot Assets

Beyond just perps, Hyperliquid also boasts functionality for native tokens via its HIP-1 token standard, which enables projects to launch tokens through a simple, five-step on-chain process where they define essential details like token name, supply cap, and initial balances. 

The most unique feature of HIP-1, though, is its Dutch auction system for acquiring token ticker symbols. In this auction process, token creators bid for ticker symbols with prices starting high and gradually decreasing over 31 hours. This approach ensures a fair and transparent bidding and listing environment, which keeps costs reasonable and regulates the pace of new listings. With only around 280 new tokens allowed each year, this system prioritizes quality and prevents the market from becoming overrun by low-quality projects. 

HIP-2: Hyperliquidity

HIP-2, known as Hyperliquidity, ensures tokens have sufficient liquidity to keep markets stable. HIP-2 handles this by providing a fully automated, onchain liquidity system specifically for HIP-1 tokens, enabling market making without third-party market makers. 

In practice, HIP-2 automatically places buy and sell orders for each token on Hyperliquid’s order book, adjusting these orders frequently to match current market prices. This feature creates a reliable, steady trading environment that benefits both token creators and traders. 

Inspired by Automated Market Makers (AMMs) like Uniswap, HIP-2 adapts AMM principles for use in a traditional order book model, the default for centralized exchanges, and which many traders prefer for its precise buy/sell pricing. 

In essence, HIP-2 functions as an inbuilt market-making service, ensuring a stable and accessible trading experience for all tokens launched on Hyperliquid’s platform.

Standout User Experience

Hyperliquid’s user experience is designed to be smooth and cost-effective, especially for active traders, with two particular standout features:

• Gasless Trading: Hyperliquid boasts a gasless trading model, letting users place orders without paying transaction fees — only minimal fees are needed for deposits and withdrawals. 
• HyperBFT: The platform uses a custom consensus mechanism called HyperBFT to handle a high volume of orders with very low delays. Most trades go through in 0.2 seconds or less, with a cap of 0.9 seconds, even in busy times. Further, this system can handle up to 100K orders per second, with the potential to scale even further in future updates.

By combining no-fee trading and fast, reliable processing, Hyperliquid provides a highly responsive and low-cost trading experience that’s ideal for both casual users and high-frequency traders.

Yield Opportunities with Vaults and Copy-Trading

Another unique feature of Hyperliquid comes from its two types of vaults, designed to help users generate returns, whether via mirroring experienced traders or earning yield through platform activities.

• User Vaults: User Vaults allow users to automatically copy the trades of experienced traders who manage these vaults. By depositing funds into a User Vault, users share in both the profits and losses of the vault’s manager, creating a passive way to benefit from potentially profitable strategies without active trading. This setup is ideal for those who want to engage in the market without needing advanced trading knowledge, though you must pick vaults wisely.
• Protocol Vaults: Protocol Vaults focus on lower-risk yield generation. For example, the Hyperliquidity Provider Vault collects returns from market-making, handling liquidations, and protocol fees. This type of vault offers a steadier, more predictable source of income through Hyperliquid’s own operational activities, making it suitable for users interested in less volatile returns.

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How to Get Exposure to HYPE?

With points ended and FOMO high, many are figuring out how to get exposure to Hyperliquid pre-TGE. As it currently stands, there are three main ways to participate, offering different levels of risk and, of course, different levels of reward.

• Hyperliquidity Vault: The lowest risk option comes from the Hyperliquidity Vault (HLP). Investing here is a bet on the activity of Hyperliquid continuing to increase and earning a return from the protocol fees, liquidations, and market-making that will come with it.
• Ecosystem Tokens: A riskier play with more potential upside is buying ecosystem tokens like PURR and HFUN, already listed on Hyperliquid. PURR is Hyperliquid’s flagship memecoin, being one of the first assets deployed under HIP-1. HFUN, on the other hand, is the token for Hypurrfun, a Telegram trading bot built by the top trader on Hyperliquid, which is evolving into a trading suite whose fees go towards buying back HFUN.
• Hyperliquid Points: Lastly, one can HL points from secondary markets. Points are currently priced at ~$12 on Whales, a far cry from the fabled $800 per point. Given the illiquidity of this option and the unknowns around when exactly HYPE will launch, buying points do come with strong risks to consider, especially given the high levels of valuation HYPE is speculated to launch at. 

What to Expect After HYPE Launch?

With HYPE's launch will come key developments that expand Hyperliquid's ecosystem and enhance decentralization, including Ethereum compatibility through HyperEVM and a community-driven governance model. Here’s what these changes mean for the future of the platform.

HyperEVM

One of the most anticipated developments after the HYPE launch is HyperEVM, which will introduce Ethereum compatibility for Hyperliquid. Ethereum developers will be able to deploy applications directly onto Hyperliquid, tapping into the network’s strength while offering its ecosystem increased versatility and functionality. 35 teams have already been identified for deploying on HyperEVM. For example, Felix Protocol will introduce stablecoin, feUSD, allowing users to borrow against major assets while earning native yield, while HyperLend will bring money markets for lending and borrowing to the L1.

Network Decentralization

As of now, Further, once HYPE is launched, Hyperliquid’s journey toward decentralization will begin, as holders will play a significant role in the platform’s governance and operational security. Through HYPE, token holders gain voting power on key decisions, from platform updates and fee structures to broader policy changes, ensuring that the community has a voice in shaping Hyperliquid’s development. 

In addition to governance, HYPE will likely play a role in enabling a distributed network of validators to increase network security. Currently, Hyperliquid operates with four core validators, all run by its team members. After TGE, Hyperliquid aims to implement a validator network to decentralize transaction validation and reduce reliance on any single operator. This approach not only enhances network security and transparency but also builds the foundation for a fully decentralized ecosystem where users are actively involved in both governance and operational resilience. 

Closing Thoughts

In just a short span, Hyperliquid has established itself as a trading powerhouse, distinguishing itself with a product-first approach, fast and fee-efficient user experience, and a dedication to organic growth. 

As the HYPE token TGE approaches, the ecosystem is poised for a significant shift toward decentralization, opening the door for community governance, rapid expansion via Ethereum compatibility with the HyperEVM, and a network of decentralized validators that enhances its security and resilience.

Whether engaging through ecosystem tokens like PURR and HFUN, participating in the Hyperliquidity Vault, or exploring secondary markets for points, early adopters have various ways to gain exposure ahead of the token launch. Hyperliquid’s future looks very promising, with HYPE launching at the perfect time to fuel its further expansion.