🟢 Jeff's Opinion on the Mass Liquidation and ADL ✅ Jeff's Opinion - Hyperliquid maintained 100% uptime during extreme volatility - System functioned normally without any bad debts - The first cross-margin ADL event in two years - While some ADLs were detrimental, overall, many traders temporarily liquidated positions at favorable prices, achieving significant profits. - While some criticism of ADLs arose, we believe they were appropriate. - Solvency and uptime are fundamental to the financial system, and disrupting them is unethical. - HLP backstopped liquidations of billions of dollars in positions over a 20-minute period. - Some HLP sub-vaults were temporarily undercollateralized due to excessive liquidation burdens, but this was intentional and designed to isolate risk. - As a result, ADL providers realized hundreds of millions of dollars in additional profits. - Hyperliquid does not charge fees for the clearing process, ensuring transparency and solvency. We will prioritize this. ✅ Liquidation Structure - To maintain the soundness of the derivatives system, all positions must be collateralized by at least the maintenance margin. - During market downturns (especially altcoins that plummet by more than 50%), positions with leverage greater than 2x must be automatically liquidated to prevent bad debt. - Hyperliquid transparently verifies all order, trade, and liquidation details on-chain, while other exchanges often underreport actual liquidation data. ✅ What is HLP? - HLP is a protocol vault that acts as a liquidity provider and backstop liquidator. - Liquidations are first attempted on the order book, and if insufficient, HLP assumes the position and collateral. - For risk management, HLP is divided into several child vaults, each independently responsible for liquidation. ✅ ADL (Auto-Deleveraging) - ADL is the final liquidation mechanism, triggering when market and backstop clearing fail. - ADL has undercollateral (undercollateralized) positions and providing positions. - ADL providers are profitable on average, but individual trades may be disadvantageous. - By design, ADL is triggered only in very rare cases. This incident marks the first cross-margin-based ADL case since the mainnet launch. Original text