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Hyperliquid Panorama Analysis: Product Status, Economic Model, and HYPE Valuation Discussion
Is Hyperliquid's valuation reasonable? A quick overview of its product status and economic model.
1. Introduction
Hyperliquid is one of the biggest highlights in the recent crypto market, aside from AI and Memes. Its strategy of not accepting venture capital investments, allocating 70% of tokens to the community, and returning all revenue to platform users has attracted market attention. The buyback mechanism of the HYPE token has rapidly pushed its circulating market value above UNI, placing it in the top 25 cryptocurrencies, while also driving a surge in the platform's business data across the board.
This article aims to describe the current development status of Hyperliquid, analyze its economic model, and evaluate the current valuation of HYPE, attempting to answer the question "Is HYPE really expensive?"
It should be noted that this article only represents the author's stage thoughts as of the time of publication and may change in the future. The viewpoints are subjective and may contain errors in facts, data, or reasoning logic. Colleagues and readers are welcome to critique and correct, but this article does not constitute any investment advice.
2. Overview of Hyperliquid's Business
Hyperliquid's current main businesses include a derivatives exchange and a spot exchange. In the future, it plans to launch a universal EVM - HyperEVM.
2.1 Derivatives Exchange
The derivatives exchange is the flagship product of Hyperliquid and is at the core of its entire ecosystem.
At the core product mechanism level, Hyperliquid adopts a central limit order book (CLOB). This is the most widely used mechanism in global exchanges and the most familiar to trading users and market makers. The decentralized derivatives exchange they built operates on Hyperliquid L1, which is a PoS chain consisting 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 the Meta pre-blockchain team, and it can support up to 2 million TPS. With strong performance support at the underlying level, Hyperliquid has put core components such as order books and clearinghouses on-chain, forming its decentralized derivatives exchange architecture.
For end users, the experience on Hyperliquid is almost identical to that of certain centralized exchanges, including trading experience, product structure, trading fees, and discount rules. The only difference is that Hyperliquid does not require KYC.
Apart from trading products, Hyperliquid has offered the Vault feature from the very beginning. The Vault is similar to the "copy trading" of centralized exchanges, where anyone can invest funds into any Vault, managed by a Vault manager. 10% of the profits are distributed to the Vault manager, and to maintain alignment of interests, the manager must ensure they hold at least 5% of the Vault.
Currently, 95% of the TVL is concentrated in the official Vault HLP. As the official Vault, HLP actually plays the role of the counterparty for a considerable amount of transactions on the platform, thus earning a portion of various platform fees such as transaction fees, funding fees, and liquidation fees (. From this perspective, HLP is relatively similar to the liquidity tokens of certain DEXs. The difference is that the liquidity tokens of certain DEXs serve as the counterparty for all transactions on the platform, with a passive and transparent strategy; while HLP's strategy is non-public, and the counterparty for user transactions could be HLP or other users, and HLP's strategy can be adjusted at any time.
Since its launch in July 2023, HLP has maintained a net short position almost continuously, providing liquidity for retail traders and maintaining profitability with a net short position during a long-term bull market. Currently, the TVL is $350 million, and the PNL is $50 million. From the overall PNL curve of HLP and the PNL of three strategy addresses, the Hyperliquid team is using fees to maintain its relatively positive APR for HLP.
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From the perspective of trading volume and open positions, Hyperliquid has been developing rapidly, especially in the last two months. With the $HYPE airdrop and continuous price increase, the platform's various metrics also reached a peak between December 17-20.
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In the field of decentralized derivatives markets, in terms of trading volume, Hyperliquid has held a leading position since June of this year, and the gap with other decentralized derivatives exchanges has further widened in the last two months, with a current order of magnitude difference.
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From the perspective of valuation and trading volume, Hyperliquid is currently more suitable for comparison with some centralized exchanges. Recently, Hyperliquid's data has shown a significant decline, with a maximum single-day trading volume of 10.4 billion USD, but in the last few days, it has been less than 5 billion USD. However, its open interest still accounts for about 10% of a leading trading platform, and the trading volume is at 6%; the open interest and trading volume are roughly equivalent to about 15% of some second-tier trading platforms. At its peak popularity from December 17-20, Hyperliquid's open interest could reach 12% of a leading trading platform, with trading volume reaching 9%; both open interest and trading volume data are close to 20% of some second-tier trading platforms.
Overall, Hyperliquid's derivatives exchange is developing rapidly, having gained a relatively solid leading advantage in the field of decentralized derivatives exchanges, with the gap compared to leading centralized exchanges reduced to within 10 times.
) 2.2 Spot Exchange
Hyperliquid's spot exchange also adopts an order book model, consistent with the product architecture and fee standards of derivative exchanges.
Currently, Hyperliquid's spot exchange only supports native Hyperliquid assets that meet the HIP-1 standard and does not support tokens from other chains.
HIP-1( decentralized token ) is similar to ERC-20 or SPL-20 and is the token standard of the Hyperliquid network. The difference is that the cost of creating HIP-1 tokens is relatively high, as successfully creating a HIP-1 token means it can be listed on the Hyperliquid spot exchange.
Hyperliquid's HIP-1 is publicly auctioned in a Dutch auction format. Everyone can participate in the bidding, with the initial auction price set at double the last transaction price, which linearly decreases to 10000U( adjustable) over 31 hours. The first developer to successfully place a bid will qualify to create a TICKER, which can be listed on the Hyperliquid spot exchange. The bidding amount is paid in USDC.
Notable created Tickers include: GOD, CREAM, ANIME, MON, SWELL, RIFT, GAME, ANZ, SOVRN, FARM, ETHC, SOLV, etc.
Through HIP-1, Hyperliquid has a public "decentralized listing" mechanism, where the listing fees are determined by market participants, avoiding the issues of centralized exchanges. On the other hand, the collected listing fees will be used for HYPE buybacks and burns, which is beneficial for HYPE's price performance and valuation metrics.
HIP-2### Hyperliquid's AMM ( provides a set of automated market-making systems to address the initial liquidity issues of tokens created through HIP-1. Developers can specify the upper and lower price limits of the market-making range and the buy-sell boundary, and the system automatically makes markets within the range at intervals of 0.3% price changes.
After the launch of HIP-2, many newly created Hyperliquid ecosystem tokens chose to use this AMM mechanism. Currently, the total USDC amount of HIP-2 has exceeded 25 million US dollars.
Hyperliquid's average daily spot trading volume over the past 30 days is around 400 million USD, ranking in the top ten among DEXs, comparable to the trading volume of certain DEXs.
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) 2.3 HyperEVM
HyperEVM is not yet online. In the official Hyperliquid documentation, the current derivatives and spot exchange running on RustVM is referred to as Hyperliquid L1, while HyperEVM is referred to as EVM. HyperEVM is not an independent chain; like other parts of L1, it is secured by the same HyperBFT consensus mechanism. This allows EVM to directly interact with L1 native components, such as spot and perpetual order books.
Hyperliquid is built on a consensus layer ( HyperBFT ) with two execution layers ( RustVM and HyperEVM ). Its core functions for contracts and spot trading are hosted on RustVM, which will also focus on these two core dApps, while the remaining dApps will be hosted on HyperEVM.
Regarding HyperEVM, we know:
The HyperEVM testnet is currently running normally, with many validators beginning to participate in testnet validation, including some well-known validator nodes.
Due to RustVM not being open to all developers, currently there are few applications developed based on Hyperliquid RustVM, mostly trading auxiliary tools. In contrast, HyperEVM is open to all developers, with many projects planned for release on it.
The specific mechanism of HyperEVM and its relationship with Hyperliquid L1 still need to wait for the official launch to clarify. Currently, the official has not provided a timeline for the launch of HyperEVM.
Summary: Hyperliquid's overall business positioning is similar to that of leading trading groups, with its core business being trading + L1 operations, making it a direct competitor to major trading groups. Although the business model is consistent, Hyperliquid chooses to build its trading business on-chain, in contrast to existing leading trading groups. Compared to centralized exchanges that require permission and have opaque data, Hyperliquid's advantages include permissionless access ### without KYC (, transparent and verifiable business data, better composability, and lower overall operational costs, which also enables it to deliver more revenue and profits to HYPE token holders.
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. Before entering the crypto industry, Jeff worked at Google and a trading firm. The Hyperliquid team is quite lean; according to a research report, there are a total of 10 team members, of which 5 are engineers, which is particularly significant for a derivatives exchange with a daily trading volume exceeding 10 billion.
From the entire product process currently being built by the Hyperliquid team, especially their commitment to developing with their own funds, building a high-performance chain to achieve a fully on-chain order book, and the highly innovative HIP-1, it is impressive that despite having a streamlined team, their ability to solve problems based on first principles always stands out.
( 3.2 $HYPE Economic Model
The total supply of $HYPE is 1 billion coins, officially released on November 29, 2024. Since there was no financing, there are no investor shares. The specific allocation is as follows:
The team and community are allocated in a ratio of 3:7.
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Currently, there are two parts involved in fees within the Hyperliquid ecosystem: trading fees and HIP-1 auction fees. Trading fees include transaction handling fees for spot and contract trades, contract funding fees, and contract liquidation handling fees. Since Hyperliquid L1 does not charge users gas fees 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:
In most other protocols, teams or insiders are the primary beneficiaries of fees. In Hyperliquid, fees are fully attributed to the community )HLP and the assistance fund ###. The assistance fund will allocate most of its