Initially, no one paid attention to this transaction, which was merely a farce, a "pulling the network cable" incident, the extinction of a concept (decentralization), and the disappearance of an L1. Until this disaster became closely related to everyone.

On March 26, Hyperliquid encountered a bloodbath triggered by a MEME, similar to the previous method of the 50x whale, where whales gathered funds and attacked the HLP vault using rule "loopholes".

Image description: Attack process content source: @ai_9684xtpa

Originally, this was a story between the attacker and Hyperliquid. Hyperliquid actually absorbed the whale's opposing order, transforming from PVP to PVH. A $4 million loss is merely a minor ailment for the Hyperliquid protocol.

However, Binance and OKX quickly listed the $JELLYJELLY contract, which seems to have a "kick them while they're down" intention. The reasoning is similar: if Hyperliquid can absorb the whale's losses through its capital volume, then exchanges like Binance can use deeper liquidity to continuously bleed Hyperliquid until it experiences excessive blood loss, entering a death cycle similar to Luna-UST.

Ultimately, Hyperliquid chose to go against the decentralization principle, "after voting" to delist $JELLYJELLY, colloquially known as "pulling the network cable", admitting its inability to compete.

In retrospect, Hyperliquid's response is normal for centralized exchanges. One can conclude that after Hyperliquid, the on-chain ecosystem will gradually acknowledge this "new normal", where centralization is not important, but governance transparency is more critical.

DEX does not need to be completely decentralized, but should be more transparent than CEX, achieving a balance between crypto culture and capital efficiency, to survive.

9% of Binance: Crypto Culture Surrenders to Capital Efficiency

Pulling the network cable is weak, inserting needles is bad, and being caught market-making is stupid.

According to The Block's data, Hyperliquid has occupied about 9% of Binance's contract trading volume for two consecutive months, which is the fundamental reason for Binance's fierce response - killing the danger at the starting line. Hyperliquid has already grown out of its cradle.

Business is like a battlefield. Yesterday, Binance could aggressively grab wallet market share when OKX DEX was delisted; today, Binance and OK can jointly strike under Hayek's big hand, which already demonstrates the situation of three-way contract market division.

Reviewing recent industry hotspots, on-chain protocols have been struggling, and maintaining decentralization is difficult. Polymarket acknowledged large户manipulation of the UMA oracle, leading to community dissatisfaction; Hyperliquid ultimately "pulled the network cable" under Binance's pressure, facing criticism from Bitget CEO and BitMEX co-founder Arthur Hayes.

First, they are all correct. Hyperliquid chose not to adhere to absolute decentralization principles, but prioritized capital efficiency and protocol security. Personally, I feel Hyperliquid's decentralization is even less than Coinbase, as the latter is truly subject to strict regulation, while Hyperliquid's true nature is a No KYC CEX as Perp DEX.

Secondly, Hyperliquid should be criticized in the context of its dual identity with CEX and Perp DEX. All the problems Hyperliquid currently faces have been experienced by CEX before, including BitMEX, which criticized Hyperliquid for insufficient decentralization. During the 3.12 event in 2020, not pulling the network cable could have potentially destroyed the entire crypto industry.

Decentralization and centralization are a classic trolley problem. Pursuing decentralization inevitably means lower capital efficiency, while pursuing centralization cannot attract free capital flow.

Image description: Hyperliquid organizational structure Source: @zuoyeweb3

Hyperliquid is actually a consensus with two business points:

• The consensus is the HyperBFT algorithm and its materialized product Hyperliquid L1;
• The businesses are HyperCore built on L1, a customized spot and contract exchange basically controlled by Hyperliquid, parallel to HyperEVM built on L1, which is a typical "EVM chain".

In this architecture, cross-chain behaviors between L1 and HyperCore/HyperEVM, and interactions between HyperCore and HyperEVM, are potential attack points. Therefore, the complex organizational structure is an inevitable move for the project team to maintain high control.

In the Perp DEX sequence, Hyperliquid's innovation is not in architectural creativity, but in learning from GMX's LP token model with a "slightly centralized" approach, combined with listing and Airdrop strategies to continuously incentivize market gaming, successfully capturing the derivatives market long dominated by CEX.

This is not a defense of Hyperliquid, but the true color of Perp DEX. Absolute decentralized governance cannot respond to black swan events quickly enough, and to respond efficiently, a sword-bearer is necessary.

Just like LooksRare didn't defeat OpenSea, but Blur ultimately did, the discussion of centralization is also hierarchical. Hyperliquid focuses more on protocol modifications. The focus of this article is not to debate centralization, but to emphasize that capital efficiency will automatically prompt the next generation of on-chain protocols to do so - becoming slightly more centralized to gain capital efficiency.

Is it about partial decentralization + transparent rules + necessary intervention, or 100% centralization + black box status + constant intervention?

Conclusion

After the 2008 financial crisis, the US government directly bailed out the market, saving Wall Street without taxpayers' consent, squeezing the blood of retail investors, continuing the lifeline of Wall Street, becoming the birthplace of Bit, and now, Hyperliquid is just a remake of the old script, but the role has become the to-be-saved on-chain Wall Street.

After the Hyperliquid crisis, big V's took turns criticizing: from Arthur Hayes to AC, all demanding that Hyperliquid adhere to the decentralization concept, which is also a continuation of on-chain business warfare. AC had previously questioned Ethena's feasibility, but this does not prevent the two from standing on the same front today.

Once a player enters the game, they must be prepared to become a chess piece.

Whether on-chain or off-chain, one must have absolute principles and relative bottom lines.