For much of 2024 and the early part of 2025, the Solana blockchain was the king of generating fees due to its high throughput for retail traders and dominance in the meme coin niche. However, recently another layer 1 network has at times flipped Solana in terms of fees generated, and it’s not Ethereum. Instead, it’s the newcomer on the blockchain - Hyperliquid.
Launched quite recently in December 2024, Hyperliquid is a decentralized exchange (DEX) operating on its own Layer-1 blockchain that boasts low fees, rapid transaction speeds, and sophisticated trading features such as perpetual derivatives. A standout feature of Hyperliquid is its on-chain order book, which facilitates real-time, transparent trading with exceptionally low latency. The project generated buzz upon launch by rejecting venture capital funding and pulling off one of the most successful community-driven airdrops in recent memory with 70% of tokens distributed to community members. Now that it’s proven to not just be a flash-in-the-pan fad, let’s see what’s exactly driving the “hype” behind Hyperliquid and whether it will become a mainstay layer 1 blockchain that’s here to stay for the long run.
Overview of Hyperliquid
One of Hyperliquid’s most intriguing aspects is its ability to capitalize on emerging narratives and events. For example, users can trade index tokens, pre-launch tokens, and most notably memecoins. In fact, Hyperliquid is among the first crypto perpetuals DEXes to support memecoin trading. To ensure precise pricing, Hyperliquid employs a decentralized oracle system in which validators update spot prices from other leading exchanges every three seconds. This frequent updating mechanism minimizes the risk of price manipulation and underpins the platform’s funding rates, margin calculations, and liquidation processes.
Another groundbreaking innovation is the introduction of scale orders, a concept borrowed from traditional markets. This feature allows users to divide large orders into smaller, incremental ones, automatically adjusting prices for buy or sell actions. Essentially, it combines multiple limit orders into a single, dynamic strategy.
Beyond scale orders, Hyperliquid offers a comprehensive suite of trading tools typically found on centralized exchanges, including market and limit orders, take-profit and stop-loss mechanisms, cross-margin functionality, and leverage of up to 50x depending on the asset. Additionally, Hyperliquid offers Hyperps, which is its own proprietary perpetual contracts. These function similarly to standard perpetuals but eliminate the need for spot or index oracle price data, streamlining the trading experience.
Elements of the Hyperliquid Protocol
HyperEVM - This is an Ethereum Virtual Machine (EVM) seamlessly integrated into Hyperliquid’s Layer 1 blockchain. Unlike standalone EVM implementations, it operates within Hyperliquid’s consensus layer HyperBFT to ensure unified functionality. The HyperEVM offers three core features:
-
Native Integration: HyperEVM smart contracts can directly interact with Hyperliquid’s core systems, such as its on-chain spot and perpetual futures order books. This integration simplifies the connection between EVM-based applications and the platform’s trading infrastructure.
-
Enabled Execution Model: Hyperliquid’s execution model allows the L1 and HyperEVM to function sequentially. The EVM can access the L1 blockchain’s state from the previous block and propose actions for the next block, leading to predictable and consistent operations.
-
Token Standards and Liquidity: ERC-20 tokens on HyperEVM are fully compatible with their native counterparts on Hyperliquid’s own network. This interoperability enables users to trade tokens with low fees, access deep liquidity, and use the tokens on dApps.
HyperBFT - Hyperliquid’s proprietary consensus algorithm is HyperBFT. It’s engineered to support high-frequency trading while ensuring security and consistency across the ecosystem. HyperBFT exhibits the following attributes:
-
Highly Performant: HyperBFT achieves block confirmation times of under one second, with a median latency of 0.2 seconds and a 99th percentile latency of 0.9 seconds. This allows the platform to handle over 200,000 transactions per second, with the potential to scale beyond 1 million orders per second as optimizations are implemented.
-
Byzantine Fault Tolerance: True to its name, HyperBFT can withstand up to one-third of validators acting maliciously while still maintaining consensus, achieving robust security even under adversarial conditions.
-
Shared State Across Environments: Both the blockchain network and HyperEVM share the same state and data availability layers. Therefore, the entire Hyperliquid ecosystem experiences seamless consistency and synchronization despite operating in distinct execution environments.
Does Hyperliquid Live up to the Hype?
Typically, decentralized exchanges rely on centralized entities to provide initial liquidity and capture most of the profits. Hyperliquid stands apart by offering complete transparency and opening liquidity provision to all community members. It offers seamless cross-chain transfers within its ecosystem, allowing traders to move cryptocurrencies across multiple blockchains such as Ethereum, Solana, Arbitrum, Base, and BNB network. Another significant advantage is Hyperliquid’s self-funded nature. This financial independence grants the project team unparalleled freedom to innovate and develop the platform without external constraints.
While Hyperliquid excels in many respects in delivering one of the most popular DEXes in the market today, it’s still a young protocol that hasn’t faced many stress tests yet. For instance, recent security concerns have emerged following reports of DPRK hackers probing the trading platform. Additionally, Hyperliquid’s dependence on a limited number of validators and quorum-based transaction approvals has sparked unease among users.
Register to get $180 Welcome Bonus!
