PANews reported on April 5th that Hyperliquid co-founder @chameleon_jeff responded on X platform to concerns about protocol security. He stated that Hyperliquid's margin design strictly ensures platform solvency through mathematical mechanisms, with HLP losses always limited to its own treasury, and the protocol never depending on HLP—a feature that existed before the JELLYJELLY incident. The newly added protection mechanisms after the event only optimize HLP's loss resistance in backup liquidation, without changing the protocol's underlying architecture. Recently, in the JELLYJELLY incident, an attacker attempted to manipulate HLP (liquidity provider pool) by establishing massive long and short positions. Although the unclosed contract upper limit allowed establishing a position worth 4 million USDC at the time, the logical flaw was that HLP used its entire fund balance to provide collateral for this liquidation. It needs to be clarified that the platform itself does not have solvency risks, but HLP did face excessive risk exposure due to market manipulation.
Currently, HLP's liquidation component vault has set a collateral upper limit, restricting potential losses through backup liquidation mechanisms. Hyperliquid maintains its original operating mechanism, handling under-collateralized positions in the following order: 1) Market liquidation 2) Backup liquidation 3) Automatic deleveraging (ADL). The current HLP backup liquidation has added protection mechanisms by setting loss limits, making attacks that manipulate mark prices far more costly than the limited gains that could be obtained from HLP.
