Hyperliquid: A Revolutionary Perp DEX | TKX Weekly

TKX CAPITAL
4 min readDec 23, 2023

by @uuwagyuu
sponsor TKX CAPITAL

Hyperliquid is a fresh player in the crypto world, focusing on a unique aspect of trading. It’s not just about trading lesser-known coins but also doing everything that the best-centralized exchanges (CEXs) do, and it’s all happening on-chain. This means traders can enjoy the efficiency and features of top exchanges but with the added benefits of being on-chain, like transparency and security. Hyperliquid’s approach could be a game-changer in how we trade a wide variety of crypto assets, including those yet to hit the market.

Introduction

Hyperliquid is making waves in the DeFi space, aiming to compete with the best centralised exchanges but with the advantages of blockchain technology. It operates on its own Layer 1 blockchain, specifically optimized for efficient perpetual futures trading, much like dYdX. The platform can handle about 20,000 orders per second, ensuring a smooth trading experience. Backed by a team from top universities and companies, such as Harvard, Caltech, Airtable, and Citadel, Hyperliquid blends centralized efficiency with the transparency and security of decentralization.

Core features

Hyperliquid L1

  • Custom-Built for Trading: Specifically designed for derivatives trading, not for general smart contracts.
  • Low Latency: Median latency of 0.2 seconds for transactions.
  • High Throughput: Capable of handling 20,000 order per second.
  • Modified Tendermint for Consensus: Optimized version used for quicker consensus.
  • Developed from Scratch: State transition logic written in Rust for robustness and efficiency.
  • Proof-of-Stake Security: Similar governance model to other crypto platforms, ensuring security.

Index Perpetual Contracts

Hyperliquid introduces some of the coolest innovations in the DeFi space, particularly its “exotic” perpetual contracts. One standout is the NFTI-USD contract, which tracks a diverse index of renowned NFT collections, such as Bored Ape Yacht Club, Mutant Ape Yacht Club, and more. This index is calculated using the 3-minute EMA of their aggregated floor prices, converted to USDT. Another fascinating contract is FRIEND-USD, the first of its kind, which adapts based on community feedback. It periodically rebalances its focus, selecting the top 20 subjects from social media with specific criteria, offering traders a unique and dynamic trading experience.

Hyperps

Hyperliquid introduces a feature known as Hyperps. Unlike traditional perpetual contracts that rely on regular prices, Hyperps calculate rates in a unique way, making them more stable and resistant to manipulation. What’s really cool is that with Hyperps, users can bet on the prices of tokens even before they officially launch. Hyperps are designed to be flexible, as they don’t require the underlying asset to exist at all times. Instead, they only need it to exist eventually for settlement or conversion. Hyperps use an 8-hour moving average of minute-by-minute mark prices from the previous day to calculate their rates, ensuring stability and reliability in the process.

Hyperliquidity Provider (HLP)

HLP (Hyperliquidity Provider) is another innovative feature offered by Hyperliquid. It plays a crucial role in enhancing liquidity within the platform. HLPs are market makers that facilitate trading by providing ample liquidity for various assets, helping to narrow the bid-ask spreads and improve overall trading efficiency. Unlike traditional market-making strategies, HLPs benefit from favorable funding rates, creating a win-win situation for traders and liquidity providers. This system encourages more participants to become HLPs, ultimately contributing to a more liquid and vibrant trading ecosystem within Hyperliquid. In contrast, GMX’s GLP operates with a different model, where liquidity providers stake tokens and earn fees directly from trading activity.

Stats

Hyperliquid has been gaining traction since its launch in June.

Volume

The daily volume has been consistently close to $400 million since December.

HLP’s PnL

HLP’s PnL is still relatively small in size compared to GLP.

New Users

The stats for new users look good. You can see that as the market warms up, the number of daily new users is climbing.

Summary

Hyperliquid is an emerging platform that specializes in perpetual trading on its Layer 1 blockchain. It stands out in the competitive perps market by introducing distinctive “exotic” perpetual contracts and innovative Hyperps for early token speculation. Hyperliquid’s HLP mechanism provides liquidity with advantageous funding rates. Despite its recent debut, Hyperliquid has garnered significant daily trading volume and a growing user base, positioning itself as a potential game-changer in the world of crypto trading.

Reference

https://hyperliquid.gitbook.io/hyperliquid-docs/
https://stats.hyperliquid.xyz/

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