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Hyperliquid: Inside the $1.5 billion token airdrop
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2024-12-20 17:02 1,186

Hyperliquid: Inside the $1.5 billion token airdrop

Author: insights4vc Source: substack Translation: Shan Oppa, Golden Finance

November 29, 2023 , Hyperliquid conducted one of the largest airdrops in cryptocurrency history, distributing $1.5 billion worth of tokens. Following this incident, the media raised questions about the project’s possible deficiencies in decentralization. In what follows, we will present Hyperliquid’s current status through clear and unbiased metrics and outline the operating model behind it.

Decentralized Finance (DeFi) aims to provide permissionless, transparent and composable financial services through blockchain networks. While early automated market maker (AMM) exchanges and lending protocols validated the core principles of DeFi, they still faced key challenges around performance and trust. In contrast, centralized exchanges dominate with higher liquidity, faster speeds, and better user experience. The collapse of the FTX platform in 2022 further highlights the systemic risks of the custody model. These issues have reignited interest in fully on-chain solutions that maintain high performance while eliminating dependence on intermediaries.

Historically, it has been very difficult to implement high-performance, trustless derivatives exchanges on standard layer-1 blockchains. Platforms like Ethereum currently cannot support the low latency and high throughput required for real-time order books. Many projects rely on Layer-2 scaling solutions, off-chain order matching, or centralized relays, all of which compromise trust or autonomy. Liquidity, as the cornerstone of efficient markets, often requires trusted intermediaries, leading to the risk of single point failure.

Core Principles and Philosophy

Unlike those VC-driven projects that have locked allocations and favor insiders, Hyperliquid allocates 70% of the total supply of $HYPE to the community . There are no private financing rounds to dilute user interests, ensuring widespread and fair distribution. By foregoing external capital support, Hyperliquid aligns incentives with user interests and promotes organic growth of the network.

The core of Hyperliquid’s philosophy is its large-scale airdrop strategy. To ensure fairness, the project has implemented strict Sybil-proof measures and flagged approximately 27,000 fraudulent wallets, thus increasing rewards for legitimate users. According to ASXNThe data shows that approximately 270.94 million $HYPE (87% of the total, covering 94,000+ addresses) has been successfully claimed. At current market prices, the total value of these tokens exceeds $7.5 billion.

Hyperliquid does not rely on short-term incentive programs, but by providing the fundamental advantages of infrastructure - low latency, deep liquidity and robust risk management - — to ensure sustainable growth, all driven by user satisfaction and a strong operating foundation.

Core Team

Hyperliquid Labs is the core contribution team that promotes the development of Hyperliquid, led by two co-founders Jeff and iliensinc, both of whom are Harvard University alumni. Team members come from top universities such as California Institute of Technology (Caltech) and Massachusetts Institute of Technology (MIT), and have professional experience in well-known companies such as Airtable, Citadel, Hudson River Trading and Nuro.

The team initially focused on a proprietary crypto market-making business in 2020, but failed due to inefficiencies with the existing platform—including poor market design. , insufficient technical performance, and clunky user interfaces—dissatisfied, they turned to DeFi in 2022. Leveraging its expertise, the team strives to bridge the gap between decentralized and centralized trading experiences to create a seamless, efficient and user-friendly product.

Funding Insights

Token Economics (HYPE)

Current Market Indicators

< p style="text-align: left;">Price: $25.11 | Market cap: $8.51 billion | Fully diluted value (FDV): $25.5 billion

Supply details

Circulating supply: 333,928,180 HYPE (33.39% of maximum supply - 1 billion)

Unlocked tokens: 37.31% (373.12 million HYPE )

Locked tokens: 238 million HYPE (accounting for 23.80% of the maximum supply)

Unlocking progress: 37%

Token distribution

Total locked volume: 23.80% (238 million HYPE) | Pending locked volume: 38.89% (388.88 million HYPE) | Unlocked volume: 37.31% (373.12 million HYPE HYPE)

Hyperliquid reinvests transaction fees into its token economy rather than treating them as profit. Spot transaction fees are used to buy back and burn $HYPE, reducing supply and stabilizing value. As of December 19, 2024, 89,000 $HYPE have been destroyed.

Buybacks and burns are triggered when thresholds are reached to balance the token economy. Over time, transaction fees may flow directly to validators and $HYPE stakers, enhancing decentralized governance and incentives.

HLPVault rewards liquidity providers who deposit USDC to support trading of listed assets. Providers receive a portion of trading fees and market-making profits. In November 2024, the monthly return of HLP Vault is approximately 1.78%, which is equivalent to an annual return of approximately 24%. These yields attract capital, deepen liquidity, and increase market efficiency.

Hyperliquid L1 architecture

Hyperliquid L1 aims to achieve a decentralized perpetual futures exchange with performance comparable to that of a centralized exchange (CEX). At the same time Keep DeFi trustless and composable. Key requirements include:

High throughput: Current DeFi systems can only achieve a few thousand TPS. Hyperliquid aims to process over 100,000 orders per second.

Low latency: Near-instant feedback and confirmation are critical for high-frequency trading strategies and retail user satisfaction.

Completely decentralized: all state (margin accounts, order placement and matching logic) is maintained on-chain to ensure transparency and eliminate interference with off-chain systems rely.

HyperBFT Consensus

Hyperliquid L1 leverages HyperBFT, a custom Byzantine Fault Tolerant (BFT) consensus algorithm targeting low end-to-end latency Optimized, mainnet testing shows a median latency of 0.2 seconds and a 99th percentile latency of 0.9 seconds measured from client request to transaction completion. design, combined with enhancements for efficient networking and fast block completion

Execution and throughput

While the consensus layer can handle millions of orders per second, the current execution infrastructure supports up to 100,000 per second orders. The team prioritizes expanding execution capabilities, recognizing that high-performance trading requires continuous improvements to smart contract logic, order matching engines, and state management systems.

"Liquidity as a Service": an AWS-like concept

AWS helps developers focus on business logic rather than infrastructure by abstracting away bare metal servers. Serve liquidity in a similar way. Instead of rebuilding order book logic, liquidity incentives, or complex backend systems, developers can directly access ready-made liquidity pools and order matching infrastructure at the protocol layer.

Builder Codes

Builder Codes are a key innovation. They allow third-party developers, regional transactions. All dedicated frontends work directly with Hyperliquid Order book integration. Each builder can define their own fee structure and user interface, while eliminating the need for custody of user funds. This model significantly lowers the barrier to entry, allowing hundreds of exchanges to flourish - they Can be tailored to specific user groups, regions or trading strategies, but all rely on Hyperliquid's deep liquidity

EVM compatibility

Ethereum Virtual Machine (EVM) compatibility ensures that lending protocols, stablecoins, yield aggregators, and insurance products can interoperate with Hyperliquid’s liquidity engine. This composability creates a “financial Lego” environment where advanced strategies such as automated hedging, cross-margin trading, and yield optimization come naturallyappear. Over time, this could lead to a class of DeFi primitives that rely on real-time liquid markets.

Trading mechanism and user experience

Hyperliquid’s perpetual contract trading standards and centralized trading Similar to CEX, it supports USDC-denominated contracts and leverage up to 50 times. Funding rates combine fixed interest with a market-driven premium. This ensures that perpetual contract prices converge with the underlying spot value, thus stabilizing the market and providing a robust environment for hedgers, speculators, and liquidity providers.

Hyperliquid solves the core pain points of on-chain transactions by eliminating gas fees and enabling near-instant transaction finalization. The user interface is streamlined and provides a one-click experience similar to the Web2 platform. Optimization for mobile and desktop ensures broad accessibility, lowering the barrier to entry for both new and experienced crypto traders.

Key indicators

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Conclusion

Compared to token-driven projects that rely on speculative funding, Hyperliquid adopts a user-centered strategy that avoids high fees and aims to cultivate a long-lasting and active community . While on-chain derivatives platforms like dYdX and GMX have gained ground, none have been able to fully replicate Hyperliquid’s overall architecture—namely, deep integration of order books, a dedicated L1 blockchain, and an economy aligned with user interests. model. While centralized exchanges like Binance or OKX currently offer deeper liquidity, Hyperliquid’s transparent, trustless structure makes it a trusted alternative as user confidence gradually shifts away from custody services.

About decentralized derivativesRegulatory standards are still evolving, but Hyperliquid’s fully auditable and user-hosted model may be more aligned with future compliance expectations. Its two-tier architecture—combining purpose-built Hyperliquid L1 and flexible HyperEVM—is designed to achieve institutional-grade transaction speeds and CEX-level liquidity, while delivering theoretical throughput of millions of orders per second through HyperBFT consensus ability.

Keywords: Bitcoin
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