Author: Revc

Currently the entire encryption industry is immersed in the lively atmosphere of the bull market, the encryption market and the US dollar Capital feasts are being staged, and in the midst of changing glasses, people seem to have forgotten the warning of the Bitcoin genesis block - "The Times reported on January 3, 2009, that the Chancellor of the Exchequer is about to implement a second round of bailouts for banks."< /p>

In the context of huge liquidity, it seems that the "VC coins" that have plagued the Web3 industry for many years are no longer a problem. Large-scale altcoins and even zombie projects have been listed one after another. DeFi projects have also received capital injections from Wall Street. The traditional financial industry seems to have With endless funds supporting the market value of crypto projects, this capital carnival makes sober observers look "out of place."

Hyperliquid, which was recently listed, has some "unique characteristics". Here are a few words from its founder:

The cryptocurrency industry pays too much attention to short-term interests

If you want to create a new financial method, letting VCs hold 50% of the network share in the early stages will It is an eternal stain

The most "successful" products in the current industry are often the issuance of fraudulent tokens. Very few projects truly follow a user-first model because acquiring real users is really difficult. Most projects take shortcuts: get investment from large market makers first and then attract transactions through incentive programs. This model is unsustainable in the long term.

From the perspective of human history, society has been developing in the direction of individualism. Every progress towards individualism, human rights, etc. is positive in terms of results, whether measured by GDP or happiness. Hyperliquid continues to push this direction: from the earliest farms that needed to use weapons to protect themselves (Yellowstone scene), to later being able to store money in banks, and now with Hyperliquid - you can fully control your funds through encryption technology.

At this point, we seem to see a "dragon-slaying boy" emerging from the ruins and ashes after the collapse of FTX. The encryption industry has only been around for more than ten years. Who is that evil dragon? In Web2, it may be BAT that monopolizes the market as a "capital spokesperson", executing a digital colonization strategy and grabbing most of the benefits of society.This trend has been alleviated by the constraints on the strategic investment departments of large manufacturers. In Web3, it may be those who are increasingly centralized entities and those who have plunged into the arms of the traditional financial system. It is particularly meaningful at this moment to think about crypto users' opposition to the plans of companies such as Metamask and OpenSea to go public.

Hyperliquid - the "dragon-slaying boy" who emerged from the ruins of FTX

Hyperliquid generation Coin HYPE conducted its genesis distribution at the end of November, airdropping more than $1.6 billion in tokens, quickly becoming the seventh largest airdrop in cryptocurrency history. In just two weeks since its launch, the price of HYPE tokens has soared from US$3 to US$28.8, and the full circulation market value has exceeded US$28.69 billion.

As a decentralized derivatives exchange, Hyperliquid has strong liquidity and For user ecology, Hyperliquid L1, a blockchain customized for high-performance derivatives trading, will be launched in the future. Through the HyperBFT consensus algorithm, Hyperliquid L1 achieves extremely low latency, processes tens of thousands of orders per second, and ensures complete transparency and decentralization of all on-chain states.

Comparison between Hyperliquid and Sui and Aptos

Through comparison, we can imagine the future of Hyperliquid L1 form. Hyperliquid focuses on DeFi performance optimization and user-first concepts; Sui focuses on flexible asset management and technological breakthroughs; Aptos focuses on the high-performance basic chain developer ecosystem. The three have their own characteristics in terms of goals and technical paths, but Hyperliquid is more focused on trading infrastructure and liquidity integration, while Sui and Aptos, as public chains, focus on ecological expansion.

The combination of sustainable DEX and L1 can develop in a deeper and higher-dimensional direction , for example, token launch platforms (existing) and native stablecoins backed by crypto assets, get rid of dependence on centralized exchange contracts and RWA assets, but will also increase systemic risks. L1 is expected to activate Hyperliquid's siphon engine to power its second phase of growth, which is expected to occur in the coming months. and benefit from ArBitrum Ecosystem, Hyperliquid is expected to usher in a wave of asset explosion.

Data comparison - CEX VS Hyperliquid

Currently, Hyperliquid mainly trades perpetual contracts. The latest data on December 16 shows that the total trading volume has reached US$6.27 billion, ranking eighth among CEX&DEX, surpassing Coinbase ($9.715 billion ), BingX ($7.689 billion) and Crypto.com ($6.628 billion) are about to break into the top five. This may not be difficult for a project that has been online for nearly two weeks. Hyperliquid’s true nature as a “CEX killer” is undoubtedly revealed.

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In addition, the total amount of USDC locked on the protocol has exceeded 2.2 billion US dollars, and the accumulated funds are about to enter the top ten of the exchange rankings.

Hyperliquid Token listing mechanism

Hyperliquid uses a Dutch auction (reduction auction) mechanism to decide which tokens can be listed on its spot market. This mechanism aims to improve the transparency and fairness of the currency listing process and bring revenue to the platform. The specific process is as follows:

1. HIP-1 deployment permission application: The project party first needs to apply for the deployment permission of the HIP-1 native token (HIP-1 is Hyperliquid Token standards established).

2. Dutch auction: Dutch auction, also known as reduced price auction.

Starting price: The starting price of each new auction is set to two times the winning bid of the previous auction.times. For example, if the last auction price was $100,000, the next auction will start at $200,000.

Price decrease: Price will decrease linearly over time.

Deal: The first bidder to accept the current price wins the auction, obtains the right to deploy the token ticker, and pays the corresponding fees.

3. Auction frequency: Auctions usually occur every 31 hours.

4. Gas fee: The project party needs to pay a gas fee, which will be fed back to HLP Vault later.

Hyperliquid's auction mechanism has significant advantages over the opaque currency listing process of centralized exchanges: it is more open and transparent, effectively reducing the possibility of black-box operations and insider trading; the Dutch auction used can reflect bidding the true psychology of the It is expected that the transaction will be completed at a relatively fair price; due to the high cost of currency listing (i.e. ticker auction fee), this mechanism has improved the quality of the online project to a certain extent; the auction process has also attracted widespread attention and discussion from the community, enhancing community participation; and, the gas charged The auction price will then be given back to the community in the form of pledge, forming a virtuous cycle.

Link:https://data.asxn.xyz/dashboard/ hl-auctions

As the popularity of Hyperliquid increases, ticker auction prices have repeatedly reached new highs. For example, GOD’s ticker auctioned for a whopping $975,700. The early auction tokens were mainly meme coins, but with the addition of high-quality projects such as Solv, Hyperliquid is gradually attracting more mature projects. Especially after SOLV goes online, it will help dilute its VC background. If Solv is successful, it will further enhance Hyperliquid’s industry influence and attract the attention of more projects.

The Tragedy of the Web3 Commons Caused by CEX and VC

The Tragedy of the Commons refers to the phenomenon in which individuals pursue maximizing their own interests when resources are shared, resulting in excessive consumption of resources, and ultimately everyone suffers. In the Web3 industry, this problem also significantly exists in centralization Between the exchange (CEX) and its cooperative venture capital institutions (VC)

CEX controls the traffic entrance and only treats users who hold its own platform currency. For core encryption users, and grant various rights and interests to platform coins (such as Launchpool and mining) to attract user participation. At the same time, CEX provides a listing channel for the tokens invested by VCs. In this model, CEX and VCs are both athletes and referees and prioritize their own profits. , ignoring the long-term development of the project and the interests of ordinary users

In this process, CEX and VC. Join forces to push up the short-term value of specific projects, resulting in unfair resource allocation and further exacerbating market speculation and bubbles. In order to obtain listing opportunities, project parties often have to pay high costs, and these tokens eventually become "VC coins" that ordinary users only use. They can take over at market highs and suffer losses. This behavior distorts the ecology of the encryption industry and sacrifices long-term value. Market participants are increasingly dissatisfied with the CEX + VC model and call for the industry to return to a transparent, fair, and sustainable development path.

Hyperliquid is expected to change the currency listing system of the crypto industry, break the situation where CEX dominates the issuance of new crypto assets, return the market to the market, the community to the community, and return to Caesar what is Caesar's. The meaning of decentralization is that no one can establish What are the correct values? No one can monopolize industry resources and development rights. However, Hyperliquid’s auction mechanism also needs to be continuously optimized or support EVM. After the public chain is launched, it will provide opportunities for more community projects to showcase, rather than relying solely on auctions to determine listing qualifications, otherwise it will easily fall into a dilemma similar to the Polkadot parachain

While practitioners enjoy the financial freedom brought by the encryption world, the industry's autonomy and self-reflection capabilities appear insufficient, and the quagmire of the tragedy of the commons is deepening. This phenomenon makes us have to review the regulatory experience of traditional markets in the financial field. Awakening the self-governance capabilities of the industry. It should be clearly understood that in the short term, obtaining users and fee income through the investment and listing of a large number of tokens can bring superficial prosperity, but in the long run, users will ultimately vote with their feet compared with the need to make money. Hope to see the true realization of the decentralized vision of the encryption industry

As a Yale economist said:"The market is not driven by logic, but by the stories we tell ourselves. When these stories are divorced from reality, bubbles will form." VC coins with high FDV (Fully Diluted Valuation) not only make the market fragile, but also make cryptocurrencies The industry is moving in a more unstable direction.

Relevant supervision and examples in the United States

Relevant supervision

Summary

Currently CEX has become the base camp for VC currency distribution. CEX and VC The combination has replaced sponsors, accounting firms, law firms, SEC regulatory review and other links in the traditional financial market, making the Web3 ecosystem like the American Wild West: wealth, freedom, chaos, greed and danger coexist. This environment is frustrating for some people, especially new crypto users. However, we still should not be bothered by the short-term impact of VC coins. Continuous Build is fundamental. The Web3 industry may one day be able to escape the "tragedy of the commons" that is the price of freedom and development.

HYPE has been rising sharply for some time with the support of bull market liquidity. Swing investors can enter the market based on their own judgment, and long-term investors can wait for a wave of corrections. In addition, Hyperliquid is also facing some unstable factors. Investors You should also be alert to related risks, Validators are currently not decentralized enough, and the on-chain order book faces execution risks due to the explosion in transaction volume. The public chain has not yet told a new growth story and regulatory risks. After all, FTX has learned from the past and the risk preferences of high-frequency quantitative traders. It may far exceed user expectations, especially reflected in the product's risk control system.

In fact, the biggest risk for Hyperliquid is to become centralized and launch its own VC. The industry’s expectations for it are still hoping that Hyperliquid will maintain the Ethereum Foundation-style decentralization. With the original intention of centralization, it continues to be at the forefront of Arbitrum & GMX-style DeFi primitive innovation, and has the ability to capture user needs as keenly as Solana. Perhaps the above expectations are too high, but it exactly reflects the industry's desire for positive changes in the encryption ecosystem. Hyperliquid represents the victory of the decentralized spirit, with Jeff asThe represented teams encourage more Builders to continue building the future. As for the valuation of Hyperliquid, it can be benchmarked against the CEX platform currency in the short term. In the long term, its value will be closer to the dual valuation of CEX+L1. In this process, decentralization is Hyperliquid’s unique advantage. Eastern CEX is VC coins, and the Western Base chain has not yet issued native tokens.