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 transaction volume of on-chain perpetual contracts was US$14.37 billion, and @HyperliquidX accounted for an astonishing US$9.3 billion, or 64.71%, demonstrating Hyperliquid's absolute dominance in the market.
However, most DEXs have struggled to match these aspects, often relying on:
・AMM design (resulting in high 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 fully on-chain."
The success of Hyperliquid proves the possibility of DEX in the face of giants such as Binance. Binance’s 24-hour perpetual contract trading volume was $97.22 billion, while the overall DEX trading volume was only $14.637 billion, of which Hyperliquid contributed $9.532 billion.
With Hyperliquid, DEX’s trading volume could reach 15% of Binance’s; without it, that percentage drops to 5%, or just $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 involved 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: build a self-custodial alternative that does not sacrifice efficiency, 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 like Binance, not because they ignore the custody risks, but because CEXs always have:
・Fast and familiar interface
・Deep liquidity
・Advanced trading functions (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). The 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 on a large scale. 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
Let's take a look at Hyperliquid's 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
・Up to 3x leverage for small market capitalization tokens
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
・Process 100,000 orders per second
・Placing and canceling orders with no or almost no gas fees
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 cancellations 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 has 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 discourages many professional traders, who prefer 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 surge: Before BTC was launched, Hyperliquid spot trading volume was only a small fraction of the $63 billion monthly BTC perpetual contract trading volume. Messari estimates that if the right assets are introduced, spot trading volume could reach 20%-30% of perpetual contract trading volume, with potential incremental growth 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 could make Hyperliquid a core marketplace 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 "banker 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, providing market-making strategies for tokens issued by HIP-1 to ensure 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.
Hyperliquid's technical core
From perpetual contracts to spot trading, all of Hyperliquid's products are built on its custom blockchain - Hyperliquid Layer1. On February 18, 2025, HyperEVM was officially launched on the mainnet.
Hyperliquid's blockchain can currently process over 20,000 transactions per second (TPS), supporting a robust ecosystem including perpetual contract trading and BTC spot markets. 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 speed of block generation depends on the communication efficiency of the validators.
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. Hyperliquid’s solution ensures verifiability and a transparent matching engine, avoiding shady dealings and front-running issues.
Dominance of the perpetual contract market
As of February 2024, Hyperliquid accounts 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, Hyperliquid's monthly perpetual trading volume reached US$196 billion, while the other four major protocols totaled only US$60 billion.
Performance and Market Maker Priorities
Hyperliquid's custom Layer-1 and consensus mechanism (HyperBFT) enables it to handle sub-second latency and approximately 100,000 transactions per second. This is specially tailored for high frequency trading. Other DEXs based on general-purpose blockchains need to share block space with many other transactions, making 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 trading pairs). This comparison highlights that an on-chain, high-performance perpetual swap exchange can effectively challenge or even dominate the centralized spot market.
On-chain transparency vs. centralized control
CEXs often have proprietary off-chain engines that may have opaque order routing, fees, or front-running. Hyperliquid’s fully on-chain design allows anyone to verify transactions instantly.
Future goal: "Binance on the chain"
The analyst described the bullish case for Hyperliquid as developing into an on-chain Binance analogy. It already offers perpetual contracts and an expanding spot market, recently launched spot BTC, and HyperEVM is now executed on the mainnet, starting to attract a wider range of DeFi applications.
In becoming a product leader in the DeFi derivatives space, Hyperliquid’s rapid success isn’t just based on performance; it’s also a testament to its community-first approach.
Hyperliquid's Community: A Trading Platform for Traders
Community-first token allocation
・No risk-free investor ownership: Hyperliquid’s team self-funded development, avoiding allocations from private investors. This ensures that the 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 approximately $45,000 per person. This is to reward real users, not speculators.
Points Program: An opaque reward mechanism inhibits Sybil attacks and favors loyal users over bots.
76% community allocation: More than 3/4 of $HYPE tokens are allocated to the community (airdrop + incentives), ensuring consistency with long-term growth.
Listen to users
Direct feedback builds communities with shared interests. The team contacted traders such as @HsakaTrades (500,000+ followers) and @burstingbagel via private messages, and established Vaults (for example: a Delta-neutral strategy with an annualized return of 20%+) and HLP based on their feedback. Since 2024, over 50% of feature updates have come from user requests, making traders co-creators rather than just users.
・Build trust through reliability
A reliable product can retain 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 without the frequent downtime of its competitors.
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 currently valued at approximately $267.24 million. Hyperliquid’s rapid growth is evident, with perpetual trading volume alone reaching $196 billion in January 2025.
What this means for end users
For HYPE holders and traders, this system creates a self-reinforcing value loop. As Hyperliquid trading activity grows (as shown in the chart below), the purchasing power of the relief fund will also grow, ultimately benefiting long-term token holders.
Self-reinforcing loop: more transactions → more fees → more buybacks → higher token value.
User-centered product design
・Gas-free transactions: Gas fees are only incurred when the transaction adds state bloat (e.g., spot listing or transfer to a new wallet).
・No KYC required: Just register via email or crypto wallet such as MetaMask.
・Intuitive interface: Designed with both beginners and advanced traders in mind, the interface is similar to centralized exchanges (such as Binance).
・Near-instant settlement: Sub-second block times support instant transactions.
・High throughput: Process over 200,000 transactions per second with no lags even during peak activity.
・Easy Funding: Deposit USDC via Arbitrum (planned 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 was initially executed by team-operated validators (to optimize performance and fast iteration), it is gradually moving towards a multi-validator network and a decentralized node framework:
・Expanded the set of validators (from 16 to over 100 nodes).
・Read-only nodes: A third party can already execute 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 tied 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 an expanded suite of validator sets, its ambition is clear: to become “Binance on the chain.”
It combines the high efficiency 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 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 adopters, ~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 kits.
4. Fully on-chain CLOB: Transparent order matching and minimal slippage, bridging the liquidity gap that typically ties traders 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 leverage 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 suite of validators, open read-only nodes, and a fee structure with no team profit to ensure incentive consistency and gradual decentralization.
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.
