What is Hyperliquid?

Who built Hyperliquid?

Hyperliquid is developed by a company called Hyperliquid Labs. It was founded by Jeff Yan and a Harvard classmate who goes by the name iliensinc. The team started out as a crypto market maker in 2020 and moved into DeFi, decentralised finance, in the summer of 2022.

A test network went live in late 2022, and trading on the main network began in 2023. Hyperliquid Labs says it is self-funded, with no venture capital or other outside money. A separate organisation, the Hyper Foundation, supports the network, for example by delegating stake to validators.

How does Hyperliquid work?

Hyperliquid is its own blockchain, a so-called layer 1Layer 1The base network itself, such as Bitcoin or Ethereum, which records transactions and settles them for good on its own blockchain., rather than an app running on top of another chain. ValidatorsValidatorA participant on a proof-of-stake network who locks up their own crypto as a stake to create and check blocks in return for rewards. who stake HYPE keep the network running. They agree on the order of transactions using a consensus mechanismConsensus mechanismThe rules that let thousands of computers agree on a single version of a blockchain without trusting any one party. called HyperBFT.

The chain has two parts:

• HyperCore is the core. It holds the order booksOrder bookA list of all open buy and sell orders for an asset, sorted by price. A trade happens when a buy order and a sell order meet. for perpetual futures and for spot trading, where crypto actually changes hands. According to Hyperliquid, the chain can handle up to 200,000 transactions per second.
• HyperEVM went live on 18 February 2025. It lets developers run smart contracts, as on Ethereum, and connect them directly to the order books.

An order book lists all the buy and sell orders in a market by price, just as on Nasdaq Iceland. Most decentralised exchangesDecentralised exchange (DEX)An exchange run by smart contracts, where people swap crypto straight from their own wallets with no company in the middle. use automated market makersAutomated market maker (AMM)A smart contract that prices tokens on a decentralised exchange with a fixed formula, based on how much of each token sits in the pool. instead, because ordinary blockchains can't handle that many orders. Hyperliquid was built to solve this.

Users connect their own crypto wallet and never hand over the keys to their funds, unlike at a centralised exchange. Collateral for trading is usually held in USDC. Others can also set up their own markets, and there are now contracts that track stock indices, commodities and currencies.

What are perpetual futures?

DerivativesDerivativesContracts whose value comes from another asset, such as shares, a currency or a cryptocurrency. are contracts that take their value from another asset. A perpetual future on bitcoin is not bitcoin, but a contract that follows the bitcoin price up and down.

An ordinary futures contract expires on a set date. A perpetual future, or perp, never expires. You can bet on the price going up or down, and betting on a fall works much like short sellingShort sellingSelling an asset you don't own in the hope of buying it back for less. A short seller profits if the price falls.. Three ideas matter most:

• Leverage. You put up collateral and control a larger position. In October 2026 the maximum leverage for bitcoin on Hyperliquid was 40x, and lower for most other coins. With 10x leverage, ISK 100,000 controls a position worth ISK 1,000,000, and a 10% price fall wipes out all of the collateral.
• Funding rateFunding rateA rate that sets the regular payments between long and short positions in perpetual futures.. To keep the contract's price close to the coin's, regular payments flow between those betting on a rise and those betting on a fall. If the contract trades above the coin, the former pay the latter, and vice versa. On Hyperliquid this balancing payment is made every hour.
• LiquidationLiquidationWhen a loan or leveraged position is closed automatically because the collateral or margin no longer covers the debt.. If losses eat the collateral down below a set minimum, the position is closed automatically. With 40x leverage, a price move of just over 1% in the wrong direction is enough.

The HYPE token

HYPE launched on 29 November 2024. That day, users who had earned points by trading on Hyperliquid received a total of 310 million HYPE, or 31% of the maximum supply of one billion. A handout like this is called an AirdropAirdropWhen a project sends free tokens straight to people's wallets, often to promote itself, though fake airdrops are also a common scam.. According to Hyperliquid, no private investors, exchanges or market makers received anything. Current and future core contributors received 23.8%, locked for one year.

HYPE is used in several ways:

• Staking. Holders stake HYPE with validators, who secure the network, and earn rewards and lower trading fees.
• Fees. HYPE is used to pay for transactions on HyperEVM and for new markets.
• Governance. Validators vote on changes to the network, and their weight depends on how much HYPE is staked with them.

Trading fees go to the HLP vault, to the so-called Assistance Fund and to those who set up markets. The Assistance Fund automatically converts its fees into HYPE, and that HYPE is burned, meaning it is permanently removed from circulation. According to Hyperliquid, the fees going to these buybacks exceed USD 1 billion on an annualised basis.

The HLP vault

HLP (Hyperliquidity Provider) is a vault owned by its users. Anyone can deposit USDC and share in its profits and losses. The vault acts as a market maker, so there is always someone to trade with. It also takes over positions that are liquidated and receives part of the trading fees.

On other exchanges, this income usually goes to the exchange itself or to large market makers. The flip side is that the vault can lose money, as shown below, and deposits are locked for four days.

Why did Hyperliquid become popular?

• Speed and self-custody. Trading feels as fast as on a centralised exchange, but the funds stay in your own wallet. After FTX collapsed in November 2022, many were wary of leaving money on an exchange.
• Users got the token. It was one of the largest airdrops ever, with nothing for venture capitalists.
• Fees go to the community. Fees flow into HLP and HYPE buybacks, not to the team or investors.
• Open to others. Other companies can build apps on top of the order books and charge fees.

What are the risks?

Leverage

Leverage magnifies both gains and losses, and a liquidation can wipe out a position in minutes. When the European Securities and Markets Authority (ESMA) looked at leveraged derivatives in 2018, 74-89% of retail investor accounts typically lost money.

Market incidents

• JELLY, March 2025. A trader opened a large short position in JELLY, a MemecoinMemecoinA cryptocurrency born from an internet joke or meme, usually with little or no practical use, whose price rests almost entirely on hype., meaning a coin driven mostly by jokes and online buzz. When the price shot up, HLP took over the liquidated position and faced losses in the millions. The validators then decided to delist the JELLY contracts and settle positions at USD 0.0095, below the market price. The Hyper Foundation compensated other users, except the owners of flagged addresses. Arthur Hayes, former CEO of BitMEX, said it was time to stop pretending Hyperliquid was decentralised.
• POPCAT, November 2025. A trader used about USD 3 million to push up the price of POPCAT, then pulled their buy orders. The price crashed, positions were liquidated and HLP was left with a loss of about USD 4.9 million.

Few validators

In October 2026 there were 27 active validators. According to data from the chain itself, the Hyper Foundation's five validators held just under half of all staked HYPE at the time. Decisions like the one in the JELLY case are therefore in few hands.

The bridge

For a long time, most USDC on Hyperliquid arrived over a BridgeBridgeA service that moves crypto or tokens between two blockchain networks, usually by locking the asset on one network and issuing an equivalent on the other. from the Arbitrum network. Withdrawals from it are approved by signatures from validators holding two thirds of the stake, and bridges have often been targets for hackers. Circle now issues USDC directly on Hyperliquid, and according to Hyperliquid the old bridge holds less than 10% of it.

Price feeds and market manipulation

Liquidations rely partly on an OracleOracleA service that brings outside information, such as prices or weather data, into smart contracts on a blockchain. price: a weighted median of prices on several large exchanges, calculated by the validators every three seconds. In coins with low liquidity, the price can be pushed around, as JELLY and POPCAT showed. In extreme cases, the system can also close positions of traders who are in profit, to cover losses elsewhere.

Which rules apply in the EEA?

Perpetual futures are derivatives and therefore count as financial instruments. In the EEA, which includes Iceland, they fall under MiFID II, the EU directive on markets in financial instruments. MiCAMiCAThe EU regulation on markets in crypto-assets, in force in Iceland since 1 January 2026, which sets the same rules for crypto services across the EEA. does not cover crypto-assets that count as financial instruments.

In February 2026, ESMA reminded firms that the label "perpetual futures" changes nothing about how these contracts are treated. It said such contracts on crypto are likely to fall under specific rules on so-called CFDs. Those rules include leverage limits, mandatory risk warnings and protection against retail investors losing more than they put in.

Hyperliquid is not authorised as an investment firm or as a crypto-asset service providerCASP (crypto-asset service provider)A company licensed under MiCA to provide crypto-asset services, such as buying, selling, custody or transfers. in the EEA. The terms of use for its web interface state that neither the interface nor Hyperliquid is licensed or registered with any authority. The interface is closed to people in the United States, in Ontario, Canada, and in countries under sanctions. Under the terms, users are responsible for making sure their trading is legal where they are.

So the protection licensed firms must provide, such as checking whether a product suits you, does not apply. Read more in How to check if a crypto provider is licensed.

Closing thoughts

Hyperliquid shows that an order-book exchange can run entirely on a blockchain, almost as fast as centralised exchanges. It became popular for its transparency, self-custody and the fact that users, not venture capitalists, received the token.

Most of the trading there, though, is leveraged derivatives trading, among the riskiest there is, and it takes place outside European supervision. Read up on the risks and on DeFi for the wider picture.