As DeFi investors prepare for the launch of the HYPE token, what is it that has drawn so much attention to Hyperliquid? \

In just two years, Hyperliquid has rapidly become one of the leading protocols in the crypto derivatives market, emerging as one of the most active decentralized exchanges for perpetual contracts.

In the blockchain space, Hyperliquid stands out by adopting a product-first strategy, achieving organic growth without relying heavily on incentives, and maintaining financial independence as a fully self-funded team. Just this week, it processed $21 billion in trading volume, and its market share of perpetual contract trading has tripled this year, rising from about 11% in December 2023 to 33% this week.

Meanwhile, Hyperliquid has been running its own rewards program and is set to launch the highly anticipated HYPE token with its Initial Token Generation Event (TGE), laying the groundwork for future decentralization, EVM compatibility, and community governance. (On the morning of November 29, HYPE launched at a price of $3.20, with the current circulating supply of 333 million tokens. In the first hour, trading volume reached $157 million. As of this writing, the token price has surged to over $9.40, a nearly 200% increase, with a market cap exceeding $3.2 billion.) \

Let’s explore what makes Hyperliquid unique and the plans following the launch of HYPE.

Hyperliquid’s uniqueness

Hyperliquid’s unique features go beyond traditional derivatives, offering carefully designed token creation tools, liquidity management, as well as a seamless user experience and yield generation capabilities.

HIP-1: Native spot asset standard

In addition to perpetual contracts, Hyperliquid also offers native token functionality through its HIP-1 token standard. Project teams can issue tokens through a simple five-step on-chain process, defining basic information such as the token name, supply cap, and initial balance.

The most unique feature of HIP-1 is its Dutch auction system for token trading codes (tickers). In this auction, token creators bid for the trading code, with prices starting high and gradually decreasing over 31 hours. This approach ensures a fair and transparent bidding and listing environment, maintains reasonable costs, and controls the pace at which new tokens are listed. Hyperliquid allows only about 280 new tokens to list annually, prioritizing quality and preventing the market from being flooded with low-quality projects.

HIP-2: Super Liquidity

HIP-2 (also known as Super Liquidity) ensures that tokens have sufficient liquidity to maintain market stability. HIP-2 achieves this by providing a fully automated on-chain liquidity system for HIP-1 tokens, without the need for third-party market makers.

In practice, HIP-2 automatically places buy and sell orders for each token on Hyperliquid’s order book and frequently adjusts these orders to match the current market price. This feature creates a reliable and stable trading environment for token creators and traders.

Inspired by automated market makers (AMMs) like Uniswap, HIP-2 applies AMM principles to the traditional order book model, which is the default mode for centralized exchanges and preferred by many traders for its precise buy and sell pricing.

Essentially, HIP-2 acts as a built-in market-making service, ensuring that all tokens issued on the Hyperliquid platform offer a stable and convenient trading experience.

Excellent user experience

Hyperliquid’s user experience design is smooth and cost-effective, making it especially suitable for active traders, with two standout features:

-Fee-Free Trading: Hyperliquid adopts a fee-free trading model, allowing users to place orders without paying transaction fees—only a small fee is charged for deposits and withdrawals.

• HyperBFT: The platform uses a custom consensus mechanism called HyperBFT to process large volumes of orders with extremely low latency. Most trades are completed within 0.2 seconds, even during peak times, with a guarantee of completion within 0.9 seconds. Additionally, the system can handle up to 100,000 orders per second, with future updates enabling even more orders to be processed.

By combining fee-free trading with fast and reliable processing capabilities, Hyperliquid offers a responsive and cost-effective trading experience, making it suitable for both regular users and high-frequency traders.

Yield Opportunities from Liquidity Pools and Copy Trading

Another unique aspect of Hyperliquid is its two types of liquidity pools, designed to help users earn yields either by copying experienced traders or through platform activities:

• User Liquidity Pools: These allow users to automatically copy the trades of experienced traders. By depositing funds into the pool, users share in the profits and losses of the pool manager, earning potential returns without actively trading. This setup is ideal for users who want to participate in the market but lack advanced trading knowledge, although caution should be taken when selecting a liquidity pool.

• Protocol Liquidity Pools: These focus on low-risk yield generation. For example, the Super Liquidity Provider pool earns returns from market making, handling liquidations, and protocol fees. These pools provide a more stable and predictable income source through Hyperliquid’s own operations, making them suitable for users interested in low-volatility returns.

Outlook After the Release of HYPE

After the release of HYPE, key developments are expected, including Ethereum compatibility through HyperEVM and a community-driven governance model.

HyperEVM

One of the most anticipated developments after the release of HYPE is HyperEVM, which will introduce Ethereum compatibility to Hyperliquid. Thirty-five teams are already preparing to deploy on HyperEVM. For example, Felix Protocol will launch the stablecoin feUSD, while HyperLend will bring a lending market to the Layer 1 chain.

Network decentralization

After the release of HYPE, Hyperliquid’s journey towards decentralization will officially begin, with token holders playing a key role in platform governance and operational security. Through HYPE, token holders will gain voting rights on key decisions, including platform updates, fee structures, and broader policy changes, ensuring the community has a say in shaping Hyperliquid’s development.

In addition to governance, HYPE will also play a role in building a distributed validator network to enhance network security. Currently, Hyperliquid is operated by four core validators managed by team members. After the token’s initial issuance, Hyperliquid plans to implement a validator network to decentralize transaction validation and reduce reliance on a single operator. This approach not only strengthens network security and transparency but also lays the foundation for a fully decentralized ecosystem, allowing users to actively participate in governance and the building of operational resilience.

Summary

In a short period, Hyperliquid has become a strong player in the trading space, standing out in the market with its product-first approach, fast and cost-efficient user experience, and focus on organic growth.

After the initial issuance of the HYPE token, the ecosystem will move toward decentralization, opening the door to community governance, rapid expansion through Ethereum compatibility via HyperEVM, and a decentralized validator network to enhance security and resilience. The future of Hyperliquid looks very promising, and the timing of the HYPE release is perfect to drive its further expansion.

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