What Is Hyperliquid? A Decentralized Exchange with Advanced Features

Here are some of the standout features that make Hyperliquid an attractive choice for traders:

• Low fees and one-click trading for a seamless experience.
• Direct deposits from over 30 blockchains, including Ethereum, Solana, and Base.
• Access to spot, margin, and perpetual trading.
• Third-party developers can create their own financial applications on Hyperliquid’s platform.

With a user base of over 300,000 and a daily trading volume of more than $4 billion, Hyperliquid offers a competitive edge for both retail and institutional traders.

Additionally, KYC (Know Your Customer) is not required, making it a fast, privacy-focused platform for traders to join by simply signing up with an email address.

Jeff Yan and Iliensinc, both former classmates at Harvard, founded Hyperliquid Labs. The development team includes industry experts from MIT, Caltech, Citadel, and Hudson River Trading.

Jeff Yan, a co-founder of the centralized exchange Chameleon Trading, and his team decided to pivot to Hyperliquid after the collapse of FTX, which created a market gap for a decentralized derivatives exchange. Hyperliquid Labs chose to remain self-funded to ensure independence from venture capital and maintain control over the platform's development.

Hyperliquid utilizes several techniques to ensure it offers fast transaction speeds compared to other decentralized exchanges:

1. Centralization of Validators: Hyperliquid’s relatively centralized structure uses 16 validators for security, a much lower number than Ethereum's 800,000.
   
2. Hyper BFT Consensus Mechanism: Hyperliquid employs a unique consensus mechanism called Hyper BFT (Byzantine Fault Tolerance), enabling the platform to process up to 200,000 transactions per second.
   
3. Order Book System: Unlike many other decentralized exchanges, Hyperliquid uses an order book system to match buyers and sellers. This system is typically found on centralized exchanges and enables faster trade execution, improving speed and efficiency.

Hyperliquid stands apart from traditional decentralized exchanges such as Uniswap, which is built on Ethereum. While Ethereum offers high security and decentralization, it suffers from slower speeds and more complex transactions.

In contrast, Hyperliquid is built on a Layer-1 blockchain and uses a more centralized system, enabling faster transaction speeds and a simpler user experience. The platform allows for one-click trading and provides access to advanced trading tools, such as margin and perpetual contracts, that are unavailable on platforms like Uniswap.

While Hyperliquid offers numerous benefits, there are a few areas that have attracted criticism:

• Withdrawal Limitations: Currently, USDC is the primary cryptocurrency supported for withdrawals. If you want to withdraw another crypto asset, you’ll first need to convert it to USDC.
  
• Centralization: Hyperliquid’s centralized nature has drawn concerns from some within the crypto community, as it contrasts with the decentralized ethos of platforms like Ethereum.
  
• New Platform: As a relatively new protocol, Hyperliquid hasn’t yet been battle-tested like older decentralized platforms. Its response to events such as cyberattacks or market crashes has not yet been proven in real-world scenarios.

Hyperliquid offers perpetual contracts and margin trading features, allowing traders to leverage their positions. Perpetual exchanges are a type of derivative trading where there’s no expiration date on the contract. Traders maintain their positions as long as they meet the required margin.

For instance, with 10x leverage, a $1,000 deposit can control a $10,000 position. If Bitcoin’s price rises from $30,000 to $35,000, the trader could see significant profits. However, leverage can also amplify losses, so traders must be cautious.

Hyperliquid allows leverage up to 50x, depending on the asset.

HYPE is Hyperliquid’s native token, launched in 2024 through an airdrop to nearly 100,000 users. The airdrop was dubbed “the most valuable ever”, with many recipients receiving between 5,000 to 10,000 HYPE tokens, which quickly appreciated in value. Within just a few weeks, these tokens were worth over $140,000.

The HYPE token has multiple use cases:

• Governance: Token holders can vote on decisions regarding the platform’s future.
  
• Gas Fees: HYPE can be used to pay for transaction fees on the Hyperliquid blockchain.
  
• Limited Supply: HYPE has a cap of 1 billion tokens, which increases its scarcity and potential value over time.

After the airdrop, 75% of HYPE tokens were distributed to current and future users, and 20% went to core contributors, including the Hyperliquid Labs development team. These tokens are locked until 2027-2028 to prevent insider sell-offs.

At the end of 2024, Hyperliquid launched HYPE staking, enabling users to earn passive income while helping verify transactions. The staking rewards are currently relatively low, sitting at just above 2% annually.

Hyperliquid emphasizes security, conducting third-party audits and offering a bug bounty program. However, as a newer platform, it carries risks compared to established Layer-1 blockchains like Ethereum.

In late 2024, Hyperliquid faced a major withdrawal due to concerns about a potential attack by North Korean hackers, which saw over $256 million withdrawn from the platform. Despite this panic, Hyperliquid was not compromised, proving its strong security protocols.

Based is a trading super-app designed for Hyperliquid users, offering both spot and perpetual futures trading with advanced features like TWAP and trailing stops. It provides a unified self-custodial wallet across web, mobile, and desktop platforms, making trading seamless and secure.

Link: Based App

OneShot is a self-custodial wallet app for iOS that connects easily to Hyperliquid with no VPN required. It provides quick access to the platform and lets users earn rewards through referrals.

Link: OneShot on App Store

Stack is a fast, non-custodial app for Android that offers simple deposits via Google Pay, credit cards, or crypto. It also features advanced trading tools, such as stop-loss and take-profit orders, for a seamless trading experience.

Link: Stack on Google Play

The official Hyperliquid web platform offers a comprehensive trading experience, with a fully on-chain order book and zero gas fees, making it ideal for traders who prefer desktop-based access.

Link: Hyperliquid Web Platform

Hyperliquid is quickly positioning itself as a leader in the decentralized finance (DeFi) space, offering advanced trading tools, low fees, and a user-friendly experience. With its innovative HYPE token, its unique consensus mechanism, and commitment to decentralization, Hyperliquid is making significant strides in bridging the gap between centralized and decentralized exchanges.