What Is Hyperliquid? HYPE, HLP, HIP-3 and the Risks Explained

Hyperliquid is a layer-1 blockchain built mainly to run a fully on-chain order-book exchange for perpetual futures and spot trading. Every order, cancel, trade and liquidation is processed by the chain itself, and its native token, HYPE, is used for staking, gas and fee discounts.

It is the largest decentralised perpetuals venue by open interest: as of 12 October 2026, DefiLlama shows about $8.0 billion of open interest and roughly $200 billion of perp volume over the previous 30 days. This guide explains how the chain is put together, what HYPE does, how the HLP vault works, which upgrades matter, and the risks worth understanding before you trade there.

What is Hyperliquid?

Hyperliquid describes itself as "a layer one blockchain (L1) written and optimized from first principles" in its official documentation. Most decentralised exchanges run as smart contracts on someone else's chain. Hyperliquid did the reverse: it built the chain around the exchange.

The project is developed by Hyperliquid Labs, led by Jeff Yan and a co-founder known as iliensinc. According to the core contributors page, the team did proprietary market making in crypto from 2020, moved into DeFi in 2022, and Hyperliquid Labs is self-funded with no external capital.

If you are new to the category, our explainer on what a perp DEX is covers the basics. Hyperliquid's distinguishing choice is that it uses a central limit order book, like a centralised exchange, rather than the AMM-style liquidity pools many on-chain venues use.

How Hyperliquid works: HyperBFT, HyperCore and HyperEVM

The chain has three layers that matter to users.

HyperBFT consensus

Hyperliquid is secured by HyperBFT, a consensus algorithm the docs describe as "a variant of HotStuff consensus". It is proof of stake: validators produce blocks in proportion to the HYPE staked to them, and the network needs more than two-thirds of stake to be honest. The HyperCore overview quotes a median end-to-end latency of 0.2 seconds for a co-located client and throughput of about 200,000 orders per second, with execution rather than consensus as the current bottleneck.

HyperCore: the exchange engine

HyperCore holds the margin and matching-engine state: the perpetual futures order books, spot order books, the clearinghouse and the protocol vaults. Because it is part of the chain's state rather than a contract, orders get one-block finality and there is no off-chain matching server. Trading collateral is mainly USDC, which the docs say is now natively minted on the Hyperliquid L1 by Circle, with the legacy Arbitrum bridge holding less than 10% of HyperCore's USDC.

HyperEVM: smart contracts

The HyperEVM is an Ethereum-compatible smart contract environment. It is not a separate chain: it shares HyperBFT consensus with HyperCore, so a lending protocol on the HyperEVM can read prices from the HyperCore order books directly. It went live on mainnet on 18 February 2025, The Block reported, with HYPE as the gas token. The docs still label the HyperEVM as "alpha stage" and note that some features, such as higher throughput, are being rolled out gradually.

The HYPE token and its airdrop

HYPE launched at a "genesis event" at 07:30 UTC on 29 November 2024. According to The Block, the 1 billion token supply was split as follows:

• 31.0% airdropped, fully unlocked, to users who had earned points
• 38.8% reserved for future emissions and community rewards
• 23.8% for current and future core contributors, locked for one year after genesis
• 6.0% for the Hyper Foundation's budget

The project said there were no allocations for private investors, centralised exchanges or market makers. The airdrop rewarded activity under a points programme that ran from November 2023 to November 2024. It is often cited in discussions of tokenomics and token unlocks.

HYPE has four main uses:

• Staking. HYPE is delegated to validators. Per the staking docs, delegations lock for one day, moving HYPE from staking back to spot takes seven days, and the reward rate falls as more HYPE is staked (the docs give about 2.37% a year at 400 million HYPE staked). There is currently no automatic slashing.
• Gas on the HyperEVM and for actions such as deploying tokens.
• Fee discounts for traders who stake.
• Bonds for market deployers under HIP-3 (see below).

Where the fees go: HLP and the Assistance Fund

Base perp fees are 0.045% for takers and 0.015% for makers at the lowest volume tier, according to the fee schedule. The same page says fees are "entirely directed to the community (HLP, the assistance fund, and deployers)" rather than to the team. DefiLlama shows about $82.9 million in fees over the 30 days to 12 October 2026.

HLP, the Hyperliquidity Provider vault

HLP is a community-owned vault that runs market-making strategies, performs liquidations and earns part of trading fees. Anyone can deposit USDC and share its profit and loss, with a four-day lock-up after each deposit. As of 12 October 2026, DefiLlama puts HLP at about $180 million.

HLP is not a savings account. It takes the other side of trades and absorbs positions that cannot be liquidated on the order book, so it can lose money. A CoinGecko analysis (updated July 2026) describes its returns as a "staircase": long flat stretches, then sharp jumps during volatile events.

The Assistance Fund

The rest of the protocol's fees go to the Assistance Fund, a system address that automatically converts fees into HYPE as part of L1 execution. In practice this works as a continuous buyback. In December 2025 the Hyper Foundation asked validators to vote on treating the fund's HYPE as burned. The fee docs now state that "HYPE in the assistance fund is burned, removing the tokens permanently from the circulating and total supply."

HIP-1, HIP-2 and HIP-3: permissionless listings

Hyperliquid Improvement Proposals (HIPs) are the main protocol upgrades:

• HIP-1 is the native token standard: a capped-supply token with its own spot order book. Deployment slots are sold in a 31-hour Dutch auction paid in HYPE.
• HIP-2 ("Hyperliquidity") bootstraps liquidity for new HIP-1 tokens with an on-chain market-making strategy that has no operator. It currently works only on spot pairs against USDC.
• HIP-3 lets builders deploy their own perpetual markets. A deployer must keep 500,000 HYPE staked, defines the oracle and contract specs, and can be slashed by a stake-weighted validator vote for malicious market operation. Deployers can also take a share of fees. HIP-3 went live on mainnet on 13 October 2025, Cointelegraph reported.

HIP-3 is why Hyperliquid now lists markets beyond crypto. As of 12 October 2026, the Hyperliquid API listed ten builder-deployed perp DEXs, and the largest, trade.xyz, offered perpetuals on US stocks, stock indices, gold, oil and currencies. DefiLlama tracks some of these deployers separately from the core Hyperliquid Perps figures quoted above. For traders, this means risk depends on the market: a HIP-3 market's oracle, leverage limits and settlement are set by its deployer, not by the core team.

Validators and decentralisation

Each validator must self-delegate 10,000 HYPE, locked for a year. Validators can vote to "jail" peers that respond too slowly; jailing stops rewards but is not slashing. As of 12 October 2026, Hyperliquid's public validator data (shown in the staking app) listed 35 registered validators, 27 of them active, with roughly 440 million HYPE staked in total.

That is a small set, and it matters: a quorum of stake decides delistings and HIP-3 slashing, and validators have intervened in markets at least once (see below). Whether that is a sensible safety valve or a centralisation risk is a live debate.

Notable incidents

Several stress events shaped how Hyperliquid works today.

• ETH whale liquidation, 12 March 2025. A trader with a very large, highly leveraged ETH long withdrew margin, letting the remaining position be liquidated into HLP. HLP lost about $4 million over 24 hours while the trader ended roughly $1.8 million in profit, CryptoSlate reported. Hyperliquid cut maximum leverage to 40x for BTC and 25x for ETH and tightened margin rules on large positions.
• JELLY market, 26 March 2025. A large short on the small-cap JELLYJELLY token was pushed into HLP, and the token's price then spiked. Validators voted to delist the JELLY perpetual and settled it at the price where the short was opened, which FXStreet reported turned HLP's position into a gain of about $700,000. Hyperliquid said all users except flagged addresses would be made whole by the Hyper Foundation. The intervention drew criticism that validators had overridden market prices.
• Market crash, 10–11 October 2025. During a market-wide liquidation cascade, Hyperliquid triggered its first cross-margin auto-deleveraging (ADL) in over two years, according to CoinGecko's HLP analysis. ADL closes profitable positions on the other side of an insolvent account so the exchange stays solvent, which means some winning traders had their positions closed early.

Risks to understand before using Hyperliquid

• Leverage and liquidation. Maximum leverage ranges from 3x to 40x depending on the asset, and maintenance margin is half the initial margin at max leverage, per the liquidation docs. If a backstop liquidation hits, you lose the maintenance margin too. Read leverage in crypto and cross vs isolated margin first.
• Funding costs. Perpetuals charge or pay funding to keep prices close to the index. See how funding rates work.
• Auto-deleveraging. In extreme moves, profitable positions can be closed for you.
• Governance intervention. Validators can delist markets and set settlement prices, as the JELLY case shows.
• HIP-3 market risk. Builder-deployed markets depend on their deployer's oracle and parameters.
• HLP is risk capital. Depositors share losses as well as profits.
• Bridging and phishing. Moving funds in and out means bridges and wallet signatures. Fake front ends and drainer sites target popular venues; check our guide to checking a DeFi protocol is safe.
• Regulation. Access to derivatives is restricted in many jurisdictions. Check your local rules and the platform's terms before you trade.

JewelSwap does not integrate Hyperliquid. It runs liquid staking and farming on MultiversX, Sui and Radix, and this guide is purely explanatory.

Frequently asked questions

Is Hyperliquid a blockchain or an exchange?

Both. Hyperliquid is a layer-1 blockchain whose core component, HyperCore, is a fully on-chain order-book exchange for perpetual futures and spot. The HyperEVM adds Ethereum-compatible smart contracts on the same chain.

When did the HYPE airdrop happen?

HYPE launched at a genesis event at 07:30 UTC on 29 November 2024. 31% of the 1 billion supply was airdropped, fully unlocked, to users who had earned points between November 2023 and November 2024.

What is HLP on Hyperliquid?

HLP (Hyperliquidity Provider) is a community-owned protocol vault that runs market-making strategies, performs liquidations and earns part of trading fees. Depositors share its profit and loss, and deposits have a four-day lock-up.

What is HIP-3?

HIP-3 lets builders deploy their own perpetual markets on Hyperliquid by keeping 500,000 HYPE staked. The deployer sets the oracle and contract specs and can be slashed by validators for malicious operation. It went live on mainnet on 13 October 2025.

How big is Hyperliquid?

As of 12 October 2026, DefiLlama showed about $8.0 billion of open interest, roughly $200 billion of perp volume over 30 days, and about $180 million in the HLP vault. These figures change daily.

Is Hyperliquid safe to use?

No trading venue is risk-free. Hyperliquid's main risks are high leverage and liquidation, auto-deleveraging in extreme moves, validator intervention in markets, builder-deployed market risk under HIP-3, and phishing or bridge risk when moving funds.

Keep reading

• What is a perp DEX?
• Best perp DEXs in 2026
• Perpetual futures explained
• Funding rates in crypto
• What is open interest?

This article is educational and isn't financial advice. Trading perpetual futures with leverage can lose you more than you expect. Protocol details are from Hyperliquid's documentation as read on 12 October 2026; volume, open interest, fee and vault figures are from DefiLlama and validator figures from Hyperliquid's public API, all as of 12 October 2026, and they change daily. JewelSwap is not affiliated with Hyperliquid.