What is Hyperliquid?
Hyperliquid is a decentralized exchange (DEX) for perpetual futures, built on its own custom Layer-1 blockchain, designed to offer high-speed, low-fee trading with an on-chain order book, aiming to combine the performance of centralized exchanges with the transparency of decentralized systems.
Max Throughput
200k TPS
Finality
Sub-second
Max Leverage
50x
Gas Fees
$0
How does Hyperliquid work?
Hyperliquid operates on its own L1 blockchain using a consensus mechanism called HyperBFT. It features a fully on-chain order book for matching trades, rather than an AMM. It supports perpetuals and spot trading, with mechanisms like vaults for liquidity.
Architecture Overview
- • Custom L1 Blockchain: Purpose-built for high-frequency trading
- • HyperBFT Consensus: Optimized for low-latency transaction processing
- • On-Chain Order Book: Full transparency with CEX-like performance
- • Zero Gas Trading: Maker/taker fees instead of gas fees
- • Native Composability: HyperEVM for smart contract integration
What are Hyperliquid's unique features?
Unique features include its purpose-built L1 blockchain with HyperBFT consensus, a fully on-chain order book, zero gas fees for trading, one-click trading, user-created and protocol vaults (HLP) for liquidity, and the launched HyperEVM for dApp development.
Custom L1 Blockchain
Purpose-built Layer-1 optimized for high-frequency trading
Mechanism: HyperBFT consensus with continuous transaction sequencing
Benefit: Up to 200k orders/sec with sub-second finality
On-Chain Order Book
Central Limit Order Book (CLOB) fully on-chain
Mechanism: Direct buyer-seller matching at specified price levels
Benefit: CEX-like trading experience with DeFi transparency
Zero Gas Fees
No gas fees for individual trades on the platform
Mechanism: Maker/taker fee model instead of per-transaction gas
Benefit: Cost-effective trading especially for high-frequency strategies
HLP Vault
Protocol-managed liquidity providing vault
Mechanism: Market-making vault taking opposite side of trades
Benefit: Democratized market-making with fee sharing
One-Click Trading
Streamlined trading without wallet confirmations
Mechanism: Initial wallet authorization for seamless execution
Benefit: CEX-like speed and user experience
HyperEVM
EVM-compatible environment for smart contracts
Mechanism: Integrated execution layer with native composability
Benefit: dApp development with direct trading integration
What is an on-chain order book, and how does it differ from an AMM?
An on-chain order book lists buy and sell orders for assets at various price levels, directly matching buyers and sellers, similar to traditional exchanges. This differs from AMMs, which use liquidity pools and algorithms to determine prices.
| Aspect | Order Book | AMM | Advantage |
|---|---|---|---|
| Price Discovery | Direct buyer-seller matching at specified prices | Algorithmic pricing based on pool ratios | Order Book |
| Trade Execution | Immediate matching or queued until counterparty found | Instant execution against liquidity pool | AMM |
| Slippage | Minimal slippage with sufficient liquidity depth | Predictable slippage based on trade size and liquidity | Order Book |
| Advanced Orders | Supports limit, stop, TWAP, scale orders | Limited to basic market orders typically | Order Book |
| Liquidity Provision | Market makers place orders manually or algorithmically | Passive LP provision to pools with automated rebalancing | AMM |
Trading Features and Capabilities
Leverage
Up to 50x leverage on perpetual futures
Variable leverage based on asset and position size
Order Types
Comprehensive range of professional order types
Market, Limit, Stop Market, Stop Limit, TWAP, Scale orders
Position Management
Advanced position and margin management tools
Reduction only, post only, immediate or cancel options
Funding Rates
Hourly funding rate mechanism for perpetuals
Fixed 0.01% every 8 hours (11.6% APR) plus market component
What is the HLP (Hyperliquid Liquidity Provider) vault?
The HLP vault is a protocol-managed vault on Hyperliquid where users can deposit USDC. It acts as a market maker and takes the other side of trades on the platform, accumulating and distributing platform fees to depositors.
HLP Vault
Protocol-managed market-making vault
Risk/Reward: Medium risk, steady returns from fees
Strategy: Takes opposite side of user trades, accumulates platform fees
Access: Open to all users with USDC deposits
User-Created Vaults
Vaults created by experienced traders
Risk/Reward: High risk/reward based on trader performance
Strategy: Follow vault creator's trading strategies
Access: Permissionless creation, various entry requirements
What are typical user interactions with Hyperliquid?
Users trade perpetual contracts (long/short with leverage up to 50x), trade spot assets, provide liquidity to the HLP or user-created vaults, and can stake HYPE tokens.
Trading Perpetuals
Long or short crypto assets with leverage
Steps:
- 1. Bridge assets to Hyperliquid
- 2. Select trading pair
- 3. Choose position size and leverage
- 4. Place order
Outcome:
Open leveraged position with potential profits/losses
HLP Vault Participation
Provide liquidity to protocol market-making vault
Steps:
- 1. Deposit USDC to HLP vault
- 2. Receive HLP tokens
- 3. Earn fees from platform trading
Outcome:
Passive income from trading fees with market-making risk
User Vault Investment
Follow experienced traders' strategies
Steps:
- 1. Research vault performance
- 2. Deposit to chosen vault
- 3. Monitor performance
Outcome:
Returns based on vault manager's trading performance
HYPE Token Staking
Stake tokens for network security and rewards
Steps:
- 1. Acquire HYPE tokens
- 2. Stake tokens
- 3. Earn staking rewards
Outcome:
Network security participation with token rewards
What is the role of the HYPE token?
The HYPE token is used for governance, staking to secure the network and earn rewards, and as a gas token on HyperEVM. Staking HYPE can also reduce trading fees.
Governance
- • Protocol parameter changes
- • Feature additions/updates
- • Fee structure modifications
- • Network upgrades
Network Security
- • Validator staking
- • Network consensus participation
- • Security rewards
- • Slashing protection
Utility Benefits
- • HyperEVM gas token
- • Trading fee discounts
- • Priority features access
- • Ecosystem incentives
What is HyperEVM?
HyperEVM is an EVM-compatible execution environment integrated into Hyperliquid's L1, allowing developers to deploy smart contracts and build DeFi applications that can interact with Hyperliquid's native trading functions and liquidity.
HyperEVM Capabilities
- • Native Composability: Direct integration with trading functions
- • EVM Compatibility: Use existing Ethereum tools and contracts
- • Low Latency: Inherits speed benefits from Hyperliquid L1
- • Liquidity Access: Tap into on-chain order book liquidity
- • DeFi Innovation: Build new financial products on fast infrastructure
What problems does Hyperliquid solve and what are the benefits?
Problems Solved
- • Slow transaction speeds on other DEXs
- • High gas fees for frequent trading
- • Poor liquidity for perpetual futures
- • High slippage on AMM-based DEXs
- • Limited advanced order types
Key Benefits
- • Ultra-fast trading (200k orders/sec)
- • Zero gas fees for trading
- • CEX-like user experience
- • Advanced order types support
- • Up to 50x leverage availability
What are the potential risks associated with using Hyperliquid?
Risks include smart contract risk (especially the Arbitrum bridge for deposits), L1 blockchain risk (being newer and less battle-tested than Ethereum), market liquidity risk, oracle manipulation risk, and centralization concerns.
Smart Contract Risk
Vulnerabilities in bridge contracts and HyperEVM
Impact: Potential loss of funds in bridge exploits or dApp bugs
Mitigation: Audits, gradual rollout, limited exposure initially
L1 Blockchain Risk
Newer L1 with less battle-testing than Ethereum
Impact: Network downtime, consensus issues, or unknown bugs
Mitigation: Conservative approach, ongoing monitoring, validator diversity
Market Liquidity Risk
Low liquidity for certain trading pairs
Impact: High slippage, difficulty entering/exiting positions
Mitigation: HLP vault provides baseline liquidity, open interest caps
Oracle Manipulation
Reliance on external price feeds for mark prices
Impact: Unfair liquidations or price manipulations
Mitigation: Multiple oracle sources, circuit breakers
Centralization Risk
Smaller validator set compared to major blockchains
Impact: Potential for network control or censorship
Mitigation: Gradual decentralization, validator diversity
Frequently Asked Questions
What is Hyperliquid?
Hyperliquid is a decentralized exchange (DEX) for perpetual futures, built on its own custom Layer-1 blockchain, designed to offer high-speed, low-fee trading with an on-chain order book, aiming to combine the performance of centralized exchanges with the transparency of decentralized systems.
How does Hyperliquid work?
Hyperliquid operates on its own L1 blockchain using a consensus mechanism called HyperBFT. It features a fully on-chain order book for matching trades, rather than an AMM. It supports perpetuals and spot trading, with mechanisms like vaults for liquidity.
What is an on-chain order book, and how does it differ from an AMM?
An on-chain order book lists buy and sell orders for assets at various price levels, directly matching buyers and sellers, similar to traditional exchanges. This differs from AMMs, which use liquidity pools and algorithms to determine prices. Hyperliquid's on-chain order book aims for transparency and CEX-like execution.
What are Hyperliquid's unique features?
Unique features include its purpose-built L1 blockchain with HyperBFT consensus, a fully on-chain order book, zero gas fees for trading (users pay maker/taker fees), one-click trading, user-created and protocol vaults (HLP) for liquidity, and the launched HyperEVM for dApp development.
What is the HLP (Hyperliquid Liquidity Provider) vault?
The HLP vault is a protocol-managed vault on Hyperliquid where users can deposit USDC. It acts as a market maker and takes the other side of trades on the platform, accumulating and distributing platform fees to depositors.
What are typical user interactions with Hyperliquid?
Users trade perpetual contracts (long/short with leverage up to 50x), trade spot assets, provide liquidity to the HLP or user-created vaults, and can stake HYPE tokens.
What problems does Hyperliquid aim to solve?
Hyperliquid aims to solve issues common in other DEXs like slow speeds, high slippage, gas fees per trade, and poor liquidity for perpetuals by offering a CEX-like experience (speed, order book) with DeFi transparency and self-custody. It also addresses liquidity for new tokens with its HIP-2 standard.
What are the benefits of using Hyperliquid?
Benefits include high transaction speeds (up to 200k orders/sec, sub-second finality), low latency, zero gas fees for trades, an order book model for potentially better pricing and reduced slippage, advanced order types, and up to 50x leverage.
What are the potential risks associated with using Hyperliquid?
Risks include smart contract risk (especially the Arbitrum bridge for deposits), L1 blockchain risk (being newer and less battle-tested than Ethereum), market liquidity risk (especially for less common pairs), oracle manipulation risk, and centralization concerns due to a smaller validator set.
What is the role of the HYPE token in the Hyperliquid ecosystem?
The HYPE token is used for governance, staking to secure the network and earn rewards, and as a gas token on HyperEVM. Staking HYPE can also reduce trading fees.
What is HyperEVM?
HyperEVM is an EVM-compatible execution environment integrated into Hyperliquid's L1, allowing developers to deploy smart contracts and build DeFi applications that can interact with Hyperliquid's native trading functions and liquidity.
Summary
Hyperliquid represents a unique approach to decentralized trading by building a custom L1 blockchain specifically optimized for high-frequency trading. With its on-chain order book, zero gas fees, and CEX-like performance, it addresses many limitations of traditional DEXs. The platform's innovative features like HLP vaults, advanced order types, and HyperEVM create new possibilities for DeFi trading and development, though users should carefully consider the risks associated with a newer blockchain and trading with leverage.
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