HyperFocus News

Hyperliquid = HyperCore + HyperEVM. One piece of user feedback since HyperEVM’s alpha launch was to more intuitively communicate how the HyperEVM fits into the larger context of Hyperliquid. To this effect, the native pieces of the Hyperliquid execution state have been organized under one umbrella term: HyperCore. HyperCore consists of performant native components: order book perp and spot DEX, staking, oracles, multi-sig, etc. HyperEVM is a general purpose world-computer, allowing builders to deploy code that interacts with both HyperEVM and HyperCore. Together, they form one global, composable state on Hyperliquid, secured by the state-of-the-art HyperBFT consensus algorithm. Importantly, any interaction across the Core/EVM boundary is part of execution itself. There is one unified state, with no need for bridging, proofs, or trusted signers. HyperEVM offers builders a familiar interface to plug into the most powerful permissionless financial system in crypto. Let's walk through some concrete examples. A project XYZ deploys an ERC20 contract on the HyperEVM using standard EVM tooling. They deploy a corresponding spot asset XYZ permissionlessly in the HyperCore ticker auction. Once the XYZ HyperCore token and HyperEVM contract are linked, users can seamlessly transfer their XYZ balance to HyperCore for order book trading. Two key improvements compared to CEX listings: 1) The entire process is permissionless. No behind-the-scenes negotiations for preferential treatment. Hyperliquid is a neutral platform for finance. 2) There is no bridging risk between HyperCore and HyperEVM. On the other hand, CEXs need to manage deposits and withdrawals through wallets that could be hacked. HyperCore and HyperEVM are one unified state. Trading and building on the same chain is a 10x product improvement over CEXs. Let's go further. A lending protocol sets up a pool contract that accepts XYZ as collateral and lends out another token ABC to the borrower. To determine the liquidation threshold, the lending smart contract can read XYZ/ABC prices directly from the HyperCore order books using a "read precompile." For a Solidity developer, this is as simple as calling a built-in function. Suppose the borrower's position requires liquidation. The lending smart contract can send orders directly swapping XYZ and ABC on the HyperCore order books using a "write precompile." Again, this is a simple built-in function in Solidity. In a few lines of code, the lending protocol has implemented protocolized liquidations similar to how perps function on HyperCore. A theme of the HyperEVM is to abstract away the deep liquidity on HyperCore as a building block for arbitrary user applications. As these interactions become available on mainnet HyperEVM, I look forward to seeing the innovative ways that builders leverage these primitives to reinvent finance. These examples only scratch the surface of what is possible. Hyperliquid.

There's been a lot of discussion on Hyperliquid's margin design. I’ll address some flaws in the common arguments and explain Hyperliquid's first-principles based approach to improving the system. To my knowledge, this is the first such design in margining systems. Perhaps other teams will find it useful for their own logic. Like good theories in physics, the best margining design is simple, canonical, explainable, and works in a wide variety of pathological scenarios. 1. The conclusion of some people has been that there needs to be a centralized force that detects and limits malicious behavior. This completely violates the purpose of defi and everything Hyperliquid stands for. This forces users back to a web2 world where the platform has the final say. True decentralized finance is worth it, even if it is 10x harder to build. Just a few years ago, no one believed DEX/CEX volumes would reach its ratio today. Hyperliquid is leading the charge here and has no intention to stop. 2. Some assume that copying approaches from CEXs will work in defi. The most common suggestion I've seen is per-address margin requirement fraction scaling with position size, as CEXs only offer higher leverage for smaller positions. However, this doesn't work to prevent manipulation attempts on a DEX because a sophisticated attacker can easily open positions on many accounts. Nonetheless, this will help somewhat reduce the impact of "organic whale" positions and is on the list of features to implement. 3. Another suggestion is to implement some features that severely limit usability of the platform in exchange for safety. For example, if unrealized pnl is not withdrawable, many attacks are not possible. Indeed, Hyperliquid pioneered isolated-only perps for illiquid assets which feature this safety mechanism. However, this change would have a crippling effect on funding arbitrage strategies, where unrealized pnl from Hyperliquid needs to be withdrawn to offset the loss on other venues. Real user needs are a top priority in system design. 4. There were also suggestions to innovate on design by having margin settings based on global parameters. However, liquidation prices need to be deterministic functions of price and position size. If global parameters such as open interest were added as inputs to margin requirements, users would lose confidence in the ability to use leverage at all. So what's the answer? We all want defi, but a permissionless system must be robust to manipulation at all scales. The answer lies in understanding the true problem with large positions: they are difficult to mark. The first order approximation of mark price times size breaks down when market impact approaches maintenance margin. It's impossible to accurately simulate market impact because book liquidity is a path-dependent function of time and actions of other participants. Without simulating market impact, it can be possible for liquidation to be a low-slippage way to exit at a price that is unfavorable to the liquidator. Therefore, Hyperliquid's margining system update has the following desirable property: any liquidated position is either a loss relative to entry price, or at least a (20% - 2 * maintenance_margin_ratio / 3) = 18.3% loss relative to the last margin transfer out (using an example of 20x leverage). An organic 20x user who makes 100% return on equity after a 5% move will still be able to withdraw the majority of the pnl without closing the position. However, by introducing separate margin requirements between transfers and opening new positions, profitable manipulation attempts require moving the mark price almost 20%. This kind of attack is infeasible from a capital perspective. Finally, I'd like to point out that the mark price problem also solves itself as market makers continue scaling up on Hyperliquid. It's quite possible that the trader yesterday could have lost money in aggregate. $1.8M pnl longing on Hyperliquid could have been more than offset when pushing the price on other venues, or using other accounts on Hyperliquid. HLP took over an undesirable position, losing $4M. The only market participants who definitely made money in aggregate are the market makers. With millions of dollars of pnl to be made in the span of minutes, it's becoming clear to sophisticated participants that Hyperliquid is one of the venues with the best flow. As liquidity improves, it will become more and more expensive to dislodge prices. So while the margining system improvements will go a long way, the allure of easy pnl attracting market makers will provide an independent source of robustness over time. The future is decentralized. Hyperliquid.

In 2024, Hyperliquid 1) redefined the crypto meta to put community above all. With Hyperliquid, there are no investors, no market makers, and no fees paid to any company. Billions of dollars of value were created by a common vision and relentless hard work. This value went directly to hundreds of thousands of users, building a passionate community with real skin in the game. You all continue to inspire me every day. 2) became the first mature, permissionless financial hub where liquidity and UX matched the most liquid centralized venues. Recent highlights include $15B 24-hour volume, reaching 20% of Bybit futures and 8% of Binance futures volume. Unlike CEXs, Hyperliquid accomplished this as a user-owned protocol. 3) reinvented several of the most entrenched and predatory centralized practices to be crypto-aligned: fair, transparent, and accessible. Examples of the last point: 1) Listings have always been controlled by CEXs that extort projects through listing fees to maximize their own profits. This is absurd, as the community drives long term success. CEXs tempt projects with immediate liquidity but kill their ultimate vision. On Hyperliquid, listings are fair, permissionless, and transparent: anyone can bid in the auction to deploy a new spot asset. Projects that want to control their own fate increasingly see Hyperliquid as one-stop infrastructure for both the tech stack and liquidity. 2) Historically, CEXs capture the lion's share of revenue in crypto. On Hyperliquid, builders are already bootstrapping 9 figure businesses. Some are monetizing >$100k per day in revenue entirely onchain through builder codes, which are a primitive built into the L1 to allow customizable monetization for applications. Others carve out and own entire verticals in the budding ecosystem. Builders are tapping into Hyperliquid as their blockchain of choice, and I’m excited for more and more to join the ecosystem this year. -- In 2025, I expect the technology of Hyperliquid to close much of the gap towards housing all of finance. The maturing technology will include a growing and permissionless validator set while improving the world-class liquidity infrastructure that Hyperliquid provides. Some concrete predictions: 1) Multiple billion dollar applications/protocols will be built on Hyperliquid. They will own their full stack but tap into the ever-growing liquidity and community. 2) More than 50% of volume from new defi projects will happen natively on Hyperliquid. Hungry teams will value the integration of CEX-level liquidity with the permissionless accessibility of blockchains. 3) Millions of users will use Hyperliquid without knowing about the blockchain at all. Just like web2, users will experience the magic of their favorite products without thinking about the underlying technology. These predictions are ambitious, but as I look back and realize just how much we've accomplished in a year, I think they're quite reasonable. Back to work!