Quick Facts Hyperliquid: Product Status, Economic Model and Valuation

Author: Lawrence Lee

1. Introduction

Hyperliquid can be said to be the largest crypto market in the recent past besides AI and Meme. The highlight of HYPE is its strategy of not accepting VC investment, allocating 70% of tokens to the community and returning all income to platform users, which has attracted market attention. Its strategy of directly repurchasing HYPE with its income has made HYPE's circulating market value quickly exceed UNI Ranking among the top 25 cryptocurrencies, its platform business data has also surged across the board.

The purpose of this article is to describe the current development of Hyperliquid, analyze its economic model, and analyze the current valuation of HYPE, and to answer the question "Is HYPE expensive?" The question gives an answer.

This article is the author's staged thinking as of the time of publication. It may change in the future, and the views are highly subjective. There may also be facts, data, and reasoning. Logical errors, criticism and further discussion from peers and readers are welcome, but this article does not constitute any investment advice.

A considerable part of this article refers to the Hyperliquid research report released by ASXN in September. This is also the most comprehensive and in-depth Hyperliquid research report the author has ever read. If readers If you want to know more details about the mechanism of Hyperliquid, you can refer to this research report.

The following is the text part.

2. Hyperliquid’s business overview

Hyperliquid’s current business mainly includes 2 parts: derivatives exchange and spot exchange. They also plan to launch a general-purpose EVM - HyperEVM in the future.

Hyperliquid architecture source: ASXN

2.1 Derivatives Exchange

Derivatives Exchange is Hyperliquid’s first online product. It is Hyperliquid’s flagship product and plays a core role in its entire product ecosystem.

In terms of the core product mechanism of derivatives, Hyperliquid did not adopt other innovative product logic (such as GMX, SNX, etc.) due to on-chain performance bottlenecks, but still chose the Central Limit Order Book (Central Limit Order). Book, CLOB) is the most widely used mechanism by various exchanges around the world, and is also the most familiar mechanism for all trading users and market makers, and has worked hard on performance.

The decentralized derivatives exchange they built runs on Hyperliquid L1, which is a PoS chain composed of the consensus layer HyperBFT and the execution layer RustVM.

HyperBFT is a consensus algorithm modified by the Hyperliquid team based on LibraBFT developed by Meta's former blockchain team. It can support up to 2 million TPS. With the powerful performance support of the underlying layer, Hyperliquid The core components of derivatives exchanges such as order books and clearing houses are put on the chain, ultimately forming its decentralized derivatives exchange architecture.

For For end users, the experience of Hyperliquid is almost exactly the same as that of centralized exchanges such as Binance, not only in terms of trading experience and product structure, but also in terms of transaction rates and discount rules. The only difference from centralized exchanges is. There is no KYC required with Hyperliquid.

Hyperliquid’s rate structure

In addition to trading products, Hyperliquid has provided the Vault function from the beginning of the product establishment. Vault is similar to the "following orders" in centralized exchanges. Everyone can invest funds in any Vault. Vault managers make investments and receive income from 10% is allocated to the Vault manager, and in order to maintain alignment of interests, the manager needs to ensure that he holds at least 5% of the Vault shares.

Source: hyperliquid official website

However, judging from the current TVL, 95% of TVL is in the official Vault HLP.

Different from the general Vault, because it is an official Vault, HLP actually acts as the counterparty to quite a few transactions on the platform, so HLP can obtain Part of the various fees on the platform (transaction fees, funding fees, clearing fees). From this perspective, HLP is relatively similar to GMX's GLP. The difference is that GLP acts as the counterparty to all transactions on the platform, and its strategy is passive and public; while HLP's strategy is non-public, and the counterparty to user transactions may be The HLP may also be other users, and the HLP's policy can also be adjusted at any time.

Since its launch in July 2023, HLP has almost always held a net short position, provided liquidity for retail transactions, and maintained profits with a net short position in the long-term bull market. , the current TVL is US$350 million and PNL is US$50 million. Judging from the overall PNL curve of HLP and the PNL of the three strategic addresses, the Hyperliquid team is using fees to maintain a relatively positive APR for its HLP.

Source: Hyperliquid official website

Judging from trading volume and positions, Hyperliquid has developed rapidly, especially in the past two months. As the $HYPE airdrop and price continued to rise, various data on the platform also reached highs between December 17-20.

Hyperliuqid’s trading volume, positions, and number of traders since 2024 Source: Hyperliquid official website

In the field of decentralized derivatives market, from the perspective of transaction volume, HyperliLiquid has occupied the leading position since June this year. In the past two months, the gap between other decentralized derivatives exchanges and Hyperliquid has further widened, and now there is an order of magnitude gap.

Decentralized derivatives exchange trading volume share source: Dune

Decentralized derivatives exchange 7-day trading Source of volume sorting: DeFiLlama

From the perspective of valuation and trading volume, the more suitable comparable object for Hyperliquid at present is centralized exchanges.

Screenshot time: 2024-12-28 Source: Coingecko

Hyperliquid's recent data has dropped significantly (the highest single-day trading volume was 10.4 billion U.S. dollars, and the trading volume in recent days has been less than 5 billion U.S. dollars), but its positions are still There is Binance 10%, and the trading volume is 6% of Binance; the holdings and trading volume are also roughly equivalent to 15% of the levels of Bitget and Bybit. At the height of its popularity (December 17-20), Hyperliquid's holdings could reach 12% of Binance's and its trading volume reached 9% of Binance's; both its holdings and trading volume data were close to 20% of Bybit and Bitget's.

Overall, Hyperliquid's derivatives exchange has developed rapidly and has a relatively solid leading advantage in the field of decentralized derivatives exchanges. Compared with the centralized exchanges, the gap has been narrowed to less than 10 times.

2.2 Spot Exchange

Hyperliquid's spot exchange is also in the form of an order book, and is consistent with derivatives exchanges in terms of product structure and fee standards.

Currently Hyperliquid’s spot deliveryThe exchange only lists Hyperliquid’s native assets that comply with HIP-1 standards and does not list tokens from other chains.

Hyperliquid is currently the top spot token by market capitalization

HIP-1 (decentralized currency listing)

HIP-1 is similar to ERC- 20 or SPL-20, is Hyperliquid The network’s token standard. However, unlike ERC-20 and SPL-20, the cost of creating a HIP-1 token is quite high, because the successful creation of a HIP-1 token also means that it can be listed on Hyperliquid's spot exchange. .

Hyperliquid's HIP-1 was publicly conducted in the form of a Dutch shoot, specifically:

Everyone can participate in the auction. The initial price of the auction is 2 times the transaction price of the last auction, and continues to decrease linearly to 10000U within 31 hours (this value is adjustable, previously lower, and recently adjusted to 10000U), the first developer to successfully bid will be eligible to create a TICKER. This TICKER can be listed on Hyperliquid's spot exchange, and the bidding amount will be paid in USDC.

Latest bidding and transaction prices:

Source: asxn

The created Tickers worth noting include (in descending order by auction amount):

GOD: Pantera Investment games

CREAM: Cream, a long-established lending project troubled by hackers, Machibigbrother related projects

ANIME: It’s AzukiThe token ticker is rumored to be acquired by the AZUKI team, but it has not yet been officially confirmed

MON: publisher of the game Pixelmoon

SWELL: Ethereum ecology's pledge & re-pledge protocol

RIFT: Virtual-based game protocol J3ff

GAME: It is rumored to be shot by GAME based on Virtual, but it has not yet been officially confirmed

ANZ: Stable currency protocol of base chain

SOVRN: the former BreederDAO (a game asset platform invested by a16z and Delphi in the last cycle), will soon release games on Hyperliquid

FARM: Hyperliquid's native AI pet game, launched through the Hyperfun platform

ETHC: Machibigbrother associated mining project

SOLV: Bitcoin ecological pledge agreement, invested by BN labs, and has not yet issued coins.

SOLV can be roughly regarded as a dividing point for the HIP-1 auction. Previously, it was mostly meme and domain name logic. The tickers mostly have symbolic meanings, and the focus of the hype is within the ecosystem. uniqueness.

After SOLV, most projects came to seize the ecological niche & qualifications for currency listing, and the price gradually increased. The highest GOD sold for nearly 1 million US dollars. . The project direction is mainly pan-entertainment, with games and NFT accounting for the majority, but there are also DeFi projects such as Solv, Swell and Cream.

In addition, it can be seen that as an exchange, Hyperliquid’s spot “listing fee” in the past month has been stable at more than 100,000 US dollars, which is different from the current second-tier The listing fees of centralized exchanges are already relatively close.

Through HIP1, Hyperliquid has a public "decentralized currency listing" mechanism. The currency listing fees paid are determined by market participants and will not encounter any problems. On the other hand, the listing fee on centralized exchanges will be used to repurchase and destroy HYPE, which is also beneficial to HYPE's price performance and valuation indicators.

HIP-2 (Hyperliquid's AMM)

Since Hyperliquid's spot trading is based on the order book For new coins, it is difficult to guarantee their liquidity. Hyperliquid proposed HIP-2 to solve the initial liquidity problem of tokens created through HIP1.

Simply put, HIP2 provides an automatic market-making system that allows developers to automatically market the tokens generated through HIP-1. The market-making logic is For linear market making within a range, the developer specifies the upper and lower price limits of the market making range, as well as the buying and selling demarcation points. The system automatically divides every 0.3% price change into a grid and automatically makes market within the range.

The picture below is an order book using HIP-2 and its parameter settings:

After the launch of HIP-2, many newly created Hyperliquid ecological tokens have chosen to use it This is Hyperliquid's AMM mechanism. At present, the total USDC amount of HIP-2 has exceeded 25 million US dollars.

Hyperliquid’s average daily spot trading volume in the past 30 days is about US$400 million, and on DEX It ranks among the top ten, with trading volumes similar to Curve, Lifinity and Orca.

Source: DeFillama

2.3 HyperEVMHyperEVM is not yet online. In Hyperliquid's official documentation, the RustVM currently running on derivatives and spot exchanges is called Hyperliquid L1, and HyperEVM is called EVM. According to the definition in its official documentation, HyperEVM is not Not an independent chain:

Hyperliquid L1 has a universal EVM As part of the blockchain state. Importantly, HyperEVM is not an independent chain, but is secured by the same HyperBFT consensus mechanism as the rest of L1. This allows EVM to interact directly with the local components of L1. For example, the spot and perpetual order books

ASXN report describes the structure of Hyperliquid with the following diagram:

Hyperliquid is equipped with two sets of execution layers (RustVM and HyperEVM) on a consensus layer (HyperBFT). Its core functions of contracts and spot are equipped on RustVM, and RustVM will also focus on this There are two core dAPPs, and the remaining dAPPs are mounted on HyperEVM.

As for HyperEVM, according to the team's documentation, we know:

Unlike RustVM, where Hyperliquid's current spot and exchange are located, HyperEVM is permission-free, which means that any developer can develop applications and issue assets (FT or NFT) on it

HyperEVM is interoperable with Hyperliquid's L1. For example, L1 oracles can be used by HyperEVM, and transfers of some currencies can also be performed between two VMs. (Not all can be interoperable because the assets on L1 are "permitted" and only include USDC and assets generated through HIP-1, while HyperEVM has many more assets)

HyperEVM will use Hyperliquid’s native token $HYPEAs Gas, Hyperliquid’s current L1 does not require users to pay Gas.

The author has not seen a similar product architecture in the crypto world before, and we still don’t know whether DeFi on the Ethereum network can be used under the current architecture. A typical case of combination "deposit ETH into Lido to obtain stETH, then deposit stETH into Aave, lend out USDC, and then use USDC to buy Meme token PEPE" in HyperEVM and Hyperliquid L1 How to implement it (this may be the standard to define whether it is one chain or two chains), but in the author's current understanding, the relationship between HyperEVM and Hyperliquid L1 may be more similar to "L2 and L1 with certain interoperability" relationship, or the relationship between a centralized exchange and its exchange EVM chain (such as the relationship between Binance and BNB Chain or Coinbase and Base Chain)

Currently HyperEVM The testnet is already running normally, and many validators have begun to participate in HyperEVM's testnet verification. The more famous ones include Chorus One, Figment, B Harvest, Nansen, etc.

HyperEVM testnet verification node list source: ASXN

Since RustVM is not open to all developers, there are currently few applications developed for RustVM based on Hyperliquid, and most of them are transaction auxiliary tools:

Such as Telegram trading robot Hyperfun (token HFUN), Telegram social trading bot pvp.trade, trading terminals tealstreet and Insilico, and derivatives trading aggregator Ragetrade, among others.

HyperEVM is open to all developers, and there are many projects planned to be released on HyperEVM. In addition to the ones we mentioned above that have successfully obtained HIP-1 tokens, Outside the project, the picture below and Hypurr.co sites all list quite a few.

The specific mechanism of HyperEVM and its relationship with Hyperliquid L1, we still need to wait for its official launch Only then did we see the difference. There is currently no official plan to launch HyperEVM.

Summary: Hyperliquid’s current overall business positioning is similar to that of leading trading groups. Its core business is trading + L1 operations, and it has become a direct competitor of major trading groups. Taste. Although the business model is consistent, compared with existing leading trading groups, Hyperliquid is different in that it chooses to build its trading business on the chain. Compared with CEX, which requires permission and has opaque data, the advantage of Hyperliquid's trading platform is that it is permissionless. Access (without KYC), transparent and verifiable business data, better composability, and lower comprehensive operating costs also give it the ability to channel more revenue and profits to its token HYPE.

3. Hyperliquid team, token economic model and valuation 3.1 team

Hyperliquid has two co-founders, Jeff Yan and iliensinc, who are alumni of Harvard University. Prior to entering the crypto industry, Jeff worked at Google and Hudson River Exchange. The Hyperliquid team is quite streamlined. According to ASXN’s September report, there are 10 team members, 5 of whom are engineers. This is especially true for a derivatives exchange with a daily trading volume of over 10 billion.

From the entire product process currently built by the Hyperliquid team, especially their insistence on self-funded research and development, self-built high-performance chain to achieve a complete on-chain order book and Judging from the highly innovative HIP-1, although the team is streamlined, its ability to always solve problems based on first principles is impressive.

3.2 $HYPE economic model

The total amount of $HYPE is 1 billion, which will be officially released on November 29, 2024. Since there is no financing, there is no investor share. The specific allocation is as follows:

31.0% of the genesis allocation was airdropped to Hyperliquid's early users according to the number of points, and is fully circulated.

38.888% is used for future emissions and community rewards

23.8% is allocated to the team and will be released after 1 year of locking, most of which are in The release will be completed between 2027 and 2028, and some will continue to be released after 2028

6.0% Hyper Foundation

0.3% community grants

0.012% HIP-2

Team and Community The overall distribution is based on the ratio of 3:7. The current currency holding addresses are as follows:

Excluding community addresses, team addresses and foundation addresses, the address currently holding the most coins is Assistance Fund (hereinafter replaced by AF), which holds 1.16% of the total HYPE supply and 3.74% of the circulating supply. %.

Currently, there are two parts related to fees in the Hyperliquid ecosystem: transaction fees and HIP-1 Auction fees. Transaction fees include spot and contract transaction fees, contract funding fees, and contract clearing fees. Since Hyperliquid L1 does not charge gas fees to users and HyperEVM has not yet been launched, Hyperliquid’s current revenue does not include transaction gas fees.

According to the team's statement in the document:

On most other protocols, the team or insiders are the main beneficiaries of fees.On Hyperliquid, fees are entirely directed to the community (HLP and the assistance fund). For security, the assistance fund holds a majority of its assets in HYPE, which is the most liquid native asset on the Hyperliquid L1.

In most other agreements, the team or insiders are fee main beneficiary. At Hyperliquid, fees belong entirely to the community (HLP and aid funds). The Aid Fund holds the majority of its assets in HYPE as this is the most liquid native asset on Hyperliquid L.

All fees belong to HLP and AF. However, the team did not clearly inform the proportion of fees between HLP and AF.

Fortunately, the data of Hyperliquid L1 is publicly available. According to the speculation logic of @stevenyuntcap, as of the beginning of December, Hyperliquid has accumulated Subsidizing HLP is US$44 million, while the initial AF funds used to purchase HYPE are US$52 million. It can be concluded that Hyperliquid's cumulative revenue from launch to early December is $96 million, or a split of the total agreement revenue between HLP and AF of 46%:54%. (In addition, we can also use Hyperliquid’s cumulative transaction volume of US$428 billion during this period to calculate the average contract rate of the Hyperliquid protocol to be about 0.0225%).

Since all AF’s USDC currently repurchases HPYE, we can simplify it as follows: 46% of Hyperliquid’s perpetual contract trading revenue during this period was allocated to supply end (HLP holders), 54% was used to buy back $HYPE tokens.

Of course, in addition to perpetual contract transaction fees, Hyperliquid will also have two parts of income that will benefit HYPE holders: auction fees from HIP-1 As well as the USDC part of the spot transaction fee, currently both parts of the income also go into AF to repurchase HYPE (it also includes the HYPE in the HYPE-USDC spot transaction fee). Part, this part is currently directly destroyed, and the cumulative number of HYPE destroyed is 110,000).

The current strategy of AF is still to regularly purchase all accumulated USDC as HYPE, so we can simply track Hyperliquid's profits and the repurchase intensity of HYPE based on AF USDC inflow data. According to According to data from hyperdata.info, AF’s cumulative USDC inflow currently exceeds US$77 million, with more than US$25 million in the past month, and the average daily repurchase is approximately US$1 million. HYPE.

On December 30, 2024, Hyperliquid officially launched the HYPE staking function. The current return rate of HYPE staking is about 2.5%. This part of the return only includes the fixed PoS consensus layer return. The return rate consensus refers to the return rate consensus of the Ethereum consensus layer (the rate of return and the pledged HYPE Inversely proportional to the square of the number), currently in addition to the 300 million tokens of the team and foundation, there are also nearly 30 million user tokens participating in the pledge

Looking to the future, HYPE's economic model still has many possibilities for adjustment in the future, such as:

HyperEVM is online,

$HYPE is used as gas for HyperEVM

The execution layer income is distributed to HYPE pledgers (the current HYPE pledge income is only Including)

Redistribution of handling fees to $HYPE holders

$HYPE pledge procedures Fee discount

3.3 Valuation

Now we will discuss the following two valuation frameworks for Hyperliquid. Before we begin, we need to point out the following:

Hyperliquid's own data has changed greatly - its market capitalization, TVL, revenue, user data, etc. have all increased several times or even dozens of times based on the original ones in the past month, and then it has increased by 5 times.A 0% retracement and the magnitude of its own indicator changes are far better than the comparison shown by the valuation indicators we list below. The following valuation framework is more suitable as a long-term valuation reference.

HYPE price is currently the biggest fundamental of Hyperliquid. The surge in its various data is more the result of the rise in HYPE price than "because of Hyperliquid" With such good data, we have such a price."

Framework 1: Comparison with BNB

The main thesis of Hyperliquid is the "chain" proposed by messari Binance":

This analogy is generally reasonable and may indeed be a better one. framework, Binance/BNB may indeed be the most suitable Hyperliquid/HYPE Comparison Object

Hyperliquid’s core business is derivatives and spot exchanges, which is consistent with Binance’s corresponding main business;

HyperEVM can be compared with BNBChain. Although HyperEVM has not yet been launched, according to the current design, both HYPE and BNB can be used as EVM chains. Gas can be pledged to obtain income;

HYPE and BNB can directly benefit from platform transaction fees;

Next, we will divide it into derivatives exchanges, spot exchanges, and EVM according to the Hyperliquid architecture to compare with Binance.

Derivatives exchange:

As we mentioned above, the recent positions of Hyperliquid and trading volume are all around 10% of Binance’s corresponding data, so we roughly believe that in the derivatives exchange module, HYPE = 10% BNB.

Spot exchange:

Hyperliquid’s average daily spot trading volume in the past thirty days is around US$400 million, while Binance excludes FDUSD which is free of fees After trading, the average daily trading volume of spot is about 26 billion US dollars, HYPE = 1.5% BNB

EVM:

According to the above logic, we believe that the relationship between HyperEVM and Hyperliquid L1 is more similar to the relationship between Binance exchange and BNBChain.

HyperEVM has not yet been launched. We cannot confirm how many TVLs will be migrated from RustVM to HyperEVM, but from the product architecture and corresponding experience, the overall logic is still based on the migration of existing users of the exchange. We list the data of Binance and Coinbase, and then take into account the market sentiment. Hype's relatively hot market sentiment, we assume that 10% of Exchange TVL will be migrated to the chain (still optimistic, but most of the current articles using TVL valuation assume that 100% of Hyperliquid TVL will be migrated to HyperEVM based on this calculation). , HYPE = 3%BNB.

Economic model

In addition, we also need to consider the differences between the HYPE and BNB economic models

From the above. The analysis of HYPE's economic model shows that HYPE currently converts 54% of the platform's gross profit and 100% of its net profit into the repurchase or destruction of HYPE.

BNB Previously, 20% of the Binance exchange's net profit was used to repurchase BNB according to the white paper. After the repurchase and destruction is decoupled from the platform's net profit in 2021, we have no way of knowing the net profit empowerment ratio of Binance to BNB. However, from the destruction Judging from the trend of data changes and Binance's market position during the same period, the proportion of net profit destruction is probably maintained at a similar level.

From the perspective of the economic model (for currency holders), HYPE is significantly better than BNB.

BNB historical destruction data source

It is also worth mentioning that the proportion of Hyperliquid’s current revenue flowing to HYPE tokens is 54%, and there is still room for this value to rise further. Due to mechanism reasons, HLP has been holding a large number of cryptocurrency short positions using USDC as collateral in the bull market since July 2023 when BTC has increased by more than 200%. Although HLP's own strategy is appropriate and it is rare to maintain a breakeven, However, you still need to pay an annual APR of more than 30% to retain the funds in the HLP.

HLP historical net position source: Hyperliquid official website p>

As the market gradually peaks in the future, the overall trend of crypto users being net long in derivatives will not change. HLP’s own strategic returns will be in shock and bear markets. Increased probability of medium elevation (from GMX to GLP As well as GNS's Vault historical returns (we can see the same trend), Hyperliquid may not need to pay such a large proportion of revenue as rent to HLP, and Hyperliquid's net profit margin is still expected to improve further.

When it comes to net interest rates, we have no way of knowing what Binance’s net interest rates are, but we can learn about the operations of centralized exchanges from the report of the listed company Coinbase. Cost peek one or two.

Coinbase quarterly report 24Q3

It can be seen that Coinbase's operating expenses (R&D, management, sales expenses and transfer expenses) in 2023 will average more than 600 million US dollars per quarter, which is basically equivalent to all revenue. Net interest rate is close to 0; With the outbreak of the market in 2024, its net interest rate has improved a lot, but the net interest rate is still less than 30%.

From the above numerical comparison, we can clearly see the advantages of Hyperliquid's net interest rate (economic model) compared to centralized transactions. We can also look at this advantage specifically from a specific event: the handling of currency listing issues.

Centralized exchanges usually have a dedicated currency listing team responsible for listing. They need to track market hot spots and negotiate with various project teams to collect currency listing fees and/or project tokens. Centralized exchanges need to pay the currency listing team considerable wages and commissions, and also need to pay to monitor and process the currency listing process. There may be benefits transfer issues to the internal control team's salary.

As mentioned above, Hyperliquid’s coin listing process HIP-1 relies on predetermined code to run automatically, and the operating cost of new coin listings is infinitely close to 0 , so that the "listing fee" of its income can be fully distributed to HYPE holders.

To sum up, at the end of December 2024, we have the following comparison:

Derivatives trading: HYPE = 10% BNB

Spot trading: HYPE = 1.5% BNB

EVM(estimate ): HYPE = 3% BNB

Economic model: HYPE is significantly better than BNB

Circulation Market capitalization: HYPE = 9% BNB

Full circulation market capitalization: HYPE = 27% BNB

Derivatives trading is Hyperliquid The most important business at present should have a relatively high weight in the valuation comparison. In the author's opinion, although HYPE's current market value cannot be said to be cheap, it is not expensive either.

Frame 2:PS

HYPE has token repurchase and destruction mechanisms, both of which directly affect HYPE tokens. PS indicators can be used for valuation, as follows:

Contract transaction fees:

We make estimates based on an average contract transaction fee of 0.0225% and a profit split of 46:54 between HLP and AF .

Hyperliquid contract revenue in the last month = US$154.7 billion * 0.0225% = US$34.8 million, of which approximately 54% went into AF to repurchase HYPE, and the amount of HYPE repurchase = US$18.79 million. The corresponding annualized net profit is US$225.5 million

HIP-1 auction fee:

The revenue in the latest month was US$6.1 million. Based on the distribution ratio of HLP and AF 46:54, the corresponding annualized net profit was US$39.5 million.

Spot transaction fee:

Hyperliquid's spot transaction fee standard is the same as that of contract transactions, and USDC is included in the fee The partial distribution method is also the same as that of contract transactions, that is, the profit is distributed 46:54 between HLP and AF; the handling fees of other tokens in spot transactions (such as HYPE-USDC transactions, the HYPE buyer pays the USDC handling fee, and the HYPE seller pays HYPE handling fee) is directly destroyed

Therefore, the spot transaction handling fee is directly affected by HYPE. We need to calculate the net profit in two parts:

HYPE part: It can be queried directly through the block browser. The HYPE token TGE is exactly 30 days old and HYPE is destroyed. The number is 110,490, corresponding to the annual destruction of 1,325,880, which is approximately US$37 million at current prices.

USDC. Portion: Hyperliquid spot trading volume in the last 30 days was $11.5 billion, the portion of spot trading used to repurchase HYPE=11US$500 million *0.0225*54%=US$1.397 million, corresponding to an annualized net profit of US$16.77 million.

Based on the above three parts of expenses, we annualized the data based on the most recent month and found that the amount used to repurchase HYPE was US$318,770,000.

HYPE's P/S is 29.4 based on circulating market capitalization. HYPE's P/S is 88 based on full circulating market capitalization.

We have listed the circulating P/S indicators of some crypto projects that are comparable to Hyperliquid:

It can be seen that the P/S valuation of L1 is significantly higher than that of the application, and the P/S valuation of Hyperliquid is significantly lower than that of comparable others. L1.

The above are two frameworks for the valuation of HYPE. What needs to be reminded again is:

Hyperliquid's own data has changed greatly - its market value, TVL, revenue, user data, etc., have increased several times or even dozens of times based on the original value in the past month, and then increased by 50% The retracement and the intensity of the changes in its own indicators are far better than the comparison shown by the valuation indicators listed below. The above valuation framework is more suitable as a long-term valuation reference.

4. Risks

The risks faced by Hyperliquid are as follows:

Funding risks, currently Hyperliquid’s All funds are stored in the bridge of its Arbitrum network, and the security of the smart contract and the multi-signature security of the 3/4 team that manages all funds are crucial.

Code risk, includingIncluding current L1 risks and HyperEVM risks. Hyperliquid adopts an innovative architecture and consensus. The current non-open source status of L1 reduces the possibility of being attacked. However, as the scale and influence of Hyperliquid increases, and HyperEVM comes online, the possibility of potential attacks/code vulnerabilities gradually increases. increase.

Oracle risk, which is an inherent risk in all derivatives exchanges.

Regulation causes the loss of comparative advantages. No KYC is currently the main comparative advantage of Hyperliquid over centralized exchanges. As the scale of Hyperliquid continues to grow, there may be problems from regulation. Anti-money laundering and other regulatory requirements.