At the end of 2024, transitioning into the beginning of 2025, a remarkable asset has caught the attention of the crypto world. In just a few days, it surged from an opening price of $2 to a high of $35.2, achieving a 1610% increase. Its airdrop scale was enormous, even surpassing Uniswap's airdrop record at one point, with an average airdrop of $28,500 per person and a TVL exceeding $2.5 billion. It can be described as a luxurious feast amidst the dead silence of yield farming sentiment in Arbitrum, Optimism, GMX, KiloEx, and other incentive mechanisms. Yes, it is ------ $HYPE.

First, let's clarify what Hyperliquid aims to do

In simple terms: Hyperliquid is a native high-concurrency L1 DeFi public chain, and its most notable product is Hyperliquid DEX, which is a comprehensive decentralized order book exchange (perp DEX) that includes contract trading, spot trading, and its own ecosystem MEME TOKENs (like purr). Therefore, it has been dubbed "the Binance on-chain" by the market. Unlike CEX, Hyperliquid's order flow, token value (oracles), and trading are all executed on its own L1, rather than on centralized servers.

Hyperliquid's consensus algorithm is Tindermint. Although Tindermint is rarely heard of, Cosmos has long been using the Tindermint algorithm. However, the Hyperliquid team has made deeper improvements to the Tindermint algorithm: end-to-end latency is 0.2 seconds, with a high throughput of 20K OPS/S. Every order, cancellation, trade, and settlement is transparently conducted on-chain, with block delays of less than 1 second. The chain currently supports 100,000 orders per second. This further lays the foundation for high-frequency, low-energy, and high-efficiency DeFi!

In summary: Hyperliquid is a native high-performance EVM L1 that can build all general ecosystems and continuously address the liquidity bottlenecks in DeFi and improve capital efficiency as a public chain protocol.

Why does Hyperliquid have the confidence to become the new DeFi unicorn?

1. The founding team has a strong professional quantitative background

The core founder of Hyperliquid is Jeff (@chameleon_jeff), who comes from Hudson River Trading, a top 15 global high-frequency quantitative firm, deeply engaged in market-making in the crypto space as a seasoned trader. More importantly, the HLP of Hyperliquid is customized by the team itself rather than through the protocol, and the combination of experience and practical operation can better adapt to changes in market liquidity.

2. Hyperliquid is a one-stop ecological expressway, solving the bottleneck of launching protocols

Hyperliquid has the HIP-1 native token protocol and the HIP-2 liquidity solution, which means users can issue tokens through HIP-1 while enjoying the market-making benefits brought by HIP-2.

So someone might ask: Isn't this the same as Pump.FUN?

What I want to say is that there is a fundamental difference. As mentioned in the previous article about Pump.FUN, when the tokens launched on Pump.FUN reach 85 SOL (about $69,000 market value), they will migrate to Raydium to establish liquidity. Essentially, Pump.FUN is merely a launch protocol that carries the initial trading scenario, ultimately passing the market-making responsibility to Raydium. However, Hyperliquid is a complete decentralized exchange combination. After users deploy tokens using HIP-1, they directly enjoy the liquidity solution of HIP-2, and the liquidity solution is based on market-making strategies customized by the Hyperliquid team, with the market-making responsibility still resting on Hyperliquid. A team with deep market-making experience can often bring many surprising solutions for liquidity without being constrained by the protocol itself.

3. Aligning with the current Web3 sovereignty ideology

Hyperliquid's current development behavior aligns very well with the market sentiment of this round of Web3:

① No VC and financing - The community does not need to worry about investors interfering with the future value space.

② Huge narrative, huge imagination space - Hyperliquid is currently labeled as contract trading, spot trading, MEME, and public chain, with each narrative capable of generating significant discussion, now combined into a single project.

③ The team is not short of funds - The quantitative background of the team itself can create diversified protocol revenue, not just a quick-fix project.

④ Positive data - The current TVL exceeds $2.5 billion, with a market cap over $8.7 billion, and even after the airdrop, there has been no significant drop.

⑤ Essentially solving liquidity issues - Technology, HIP protocols, and genuinely addressing current problems and seeing practical implementations.

⑥ Diverse ways to make money - Vaults follow institutions or DAOs to earn; HLP makes markets + earns from liquidation; point airdrops (already realized).

⑦ Airdrop expectations based on interaction contributions to fairly enjoy rewards.

Hype Tokenomics

The total supply of $HYPE is 1 billion tokens, officially released on November 29, 2024. Due to no financing, there are no investor shares, with the specific distribution as follows:

• 31.0% Genesis distribution, airdropped to early users of Hyperliquid according to points quantity, fully circulating.

• 38.888% for future emissions and community rewards.

• 23.8% allocated to the team, locked for 1 year before starting to release, with most released between 2027-2028, and some continuing to be released after 2028.

• 6.0% Hyper Foundation.

• 0.3% community grants.

• 0.012% HIP-2.

The team and community are distributed in a 3:7 ratio. The current holding address situation is as follows:

The above bold content and holding address chart are extracted from: https://www.chaincatcher.com/article/2160008

Currently, $HYPE is circulating about 33% through airdrops, and is being released through a points mechanism. Starting from November 1, 2023, it will be distributed to users weekly for a period of 6 months, ending on May 1, 2024. The L1 phase points will start on May 29, 2024, and end in November 2024. 700,000 points will be distributed weekly. Activities from May 1 to 28, 2024, can earn multipliers. Essentially, two waves of user growth activities have been conducted, from testing to sharing in L1 practice, providing the first batch of users with the most considerable returns.

Additionally, from the interview article with Mint Ventures (https://www.chaincatcher.com/article/2160008), a high-level summary of the current token economic flow of $HYPE is as follows:

1. Protocol revenue and distribution:

• As of early December, Hyperliquid has accumulated $96 million in perpetual contract trading revenue.

• Revenue distribution ratio: 46% allocated to HLP holders (supply side), 54% used for repurchasing HYPE.

1. Trading volume and fee rates:

• Cumulative trading volume of $428 billion.

• Average contract fee rate of approximately 0.0225%.

1. HYPE repurchase strategy:

• All USDC income from AF is used to repurchase HYPE.

• Cumulative repurchase of HYPE exceeds $77 million, with an average daily repurchase of $1 million in the last month.

1. Additional income:

• HIP-1 auction fees and spot trading fees (USDC portion) all go into AF for repurchasing HYPE.

• The HYPE portion of HYPE-USDC spot trading fees is directly burned, with a cumulative burn of 110,000 HYPE.

Without any VC and financing, Hyperliquid has established a relatively healthy repurchase mechanism and diversified income sources to continuously strengthen the value support of HYPE. Even in the face of major influencers like Block Mr. suggesting to start reducing holdings, it still steadily achieves growth.

Is Hype currently overvalued? What does the future hold?

As I mentioned earlier, Hyperliquid is a** high-performance L1 DeFi public chain + order book decentralized exchange**. Since it is a public chain, there are infinite possibilities for construction. Hyperliquid's current development and ecological construction are still in the early stages, and I believe the current level of development is less than 10%. Although it has initially established the framework for trading, lending, and staking, *the truly rich DeFi derivatives and practical application scenarios* are the core drivers for the continuous value growth of $HYPE.

Current issues and challenges in the ecosystem

1.

Ecosystem singularity and potential overvaluation

• Currently, the market heat of $HYPE (FOMO sentiment) is high, but the ecosystem is relatively singular, not fully reflecting its public chain potential. This limitation may lead to a certain degree of overvaluation of $HYPE, lacking long-term sustainable support.

2.

Key risk factors

• User fund security: As more users and funds enter, ensuring the safety of user assets becomes a top priority.

• Code auditing and vulnerability prevention: The security of smart contract code directly relates to the stability of the entire ecosystem.

• Oracle dependency risk: Oracles, as the core input for on-chain data, are crucial for the accuracy and security of DeFi.

• Compliance and regulation: In the face of increasingly stringent global regulations, the Hyperliquid team needs to find a balance between technological innovation and compliance requirements.

3.

Insufficient ecosystem richness

• Currently, there are only basic financial functions (trading, lending, staking) and the HYPE repurchase mechanism, lacking a complete DeFi ecosystem loop and missing application scenarios that attract diverse user needs.

Future development directions and opportunities for Hype

Despite facing certain challenges, I believe Hyperliquid has the potential to become an innovative DeFi project. In future development, the team should focus on the following directions:

1.

Enrich ecosystem construction

• Introduce more DeFi derivatives, such as options, leveraged products, structured products, etc., to meet the needs of users with different risk preferences.

• Expand practical application scenarios, such as on-chain payments, cross-border settlements, decentralized insurance, etc.

2.

Enhance technical security

• Strengthen code auditing processes, introduce multi-verification mechanisms, and reduce potential security vulnerabilities.

• Optimize oracle dependency by choosing highly reliable solutions (such as Chainlink or self-developed oracle systems).

3.

Community-driven innovation

• Leverage the composability of the Hyperliquid public chain to encourage developers to build more decentralized applications (DApps).

• Attract developers and the community to participate in ecosystem construction through token incentive mechanisms, enhancing user stickiness.

4.

Regulation and transparency

• Proactively embrace global regulatory trends, establish transparent financial and governance strategies to provide users with trustworthy decentralized services.

• Regularly disclose operational data to the community to strengthen user trust.

Conclusion: Opportunities and challenges coexist

The core of DeFi is always safety and sustainable development. Hyperliquid has demonstrated high performance and innovative potential in the current market, but it still needs to address key issues such as insufficient ecosystem richness and risk management to achieve higher value. I believe that Hyperliquid, as an innovative DeFi project, is worth long-term attention, provided that capital management is in place. In the future, when its team combines safety with ecosystem construction, achieving a transformation from "hot project" to "ecosystem-driven platform," Hyperliquid is expected to become one of the important drivers in the DeFi field.