HyperLiquid has provided some important updates following the JELLY incident yesterday, detailing the key lessons and security upgrades. Although HYPE's price dropped sharply yesterday, it is gradually stabilizing today.
However, there are still criticisms about HyperLiquid's actions during the crisis. They responded quickly to illegal activities threatening themselves but were quite passive during the Bybit hack in February.
HyperLiquid's Response to the JELLY Crisis
HyperLiquid, a popular DEX, is recovering after a major scandal. Yesterday, HyperLiquid delisted JELLY after a short squeeze nearly caused the company to lose $230 million.
This attracted a wave of criticism from the community, fearing another FTX-like collapse. Today, HyperLiquid posted a response to the situation:
"Yesterday was a good reminder to stay humble, hungry, and focused on what matters: building a better, people-owned financial system. Users with long JELLY positions at the time of settlement will be reimbursed by the Fund. This means all JELLY traders will be paid at a price favorable to them, except for flagged addresses," they stated.
HyperLiquid also detailed some security measures they will implement to prevent a similar incident to JELLY. First, they have implemented token delisting and stricter open interest limits.
Most importantly, the platform has made significant adjustments to its liquidation protocols, setting up multiple protective barriers for the main cause of the chaos.
So far, it is unclear whether HyperLiquid's measures can prevent another JELLY incident. If nothing else, HYPE's recovery today reflects the restored community sentiment.
Less than a week ago, HYPE was gaining strong momentum, but yesterday's event caused a significant drop. However, this altcoin has rebounded today, avoiding further losses.
Weekly price chart of Hyperliquid. Source: BeInCryptoCan the Community Trust Hyperliquid?
The crypto community has strongly criticized how the exchange handled the situation. Concerns revolve around a simple question: Is Hyperliquid truly a decentralized exchange? Delisting a token and seizing investor funds goes against the core principles of DeFi.
ZachXBT, a famous crypto investigator, was particularly disappointed with the company's actions. A few months ago, he identified a potential security vulnerability from North Korea, which the company denied.
However, HyperLiquid acted quickly to disable JELLY transactions, proving they can respond rapidly.
"HyperLiquid recently saw illegal flows [and] said it was decentralized, so nothing could be done. Now, HyperLiquid has made a centralized decision to quickly close positions at an arbitrary price for an entity using the protocol as intended. If this could be done for JELLY, perhaps it should also be done for both," ZachXBT stated.
Finally, HyperLiquid has time to reflect and update its strategy from the JELLY incident. Yesterday's event shook the entire crypto community, but the disaster was avoided.
Hopefully, the platform can act in good faith to protect user funds and its decentralized principles.
