Introducing Hyperliquid: your new home to trade perps on DeFi

4 min readDec 29, 2022

Hyperliquid is an order book based perpetual futures decentralized exchange. But that’s a lot of words — Hyperliquid is the only exchange you need to trade perps in DeFi. The DEX runs on the Hyperliquid chain, an L1 built on Tendermint. Hyperliquid will offer full transparency, low costs, and impeccable execution.

The L1 testnet is currently live — check it out at https://hyperliquid.xyz/trade. Mainnet closed alpha is coming soon in Q1 23.

DeFi is the future

We strongly believe in decentralization, self custody, and transparency. Hyperliquid offers the CEX experience without the risk of interacting with opaque institutions that misuse your funds. You retain full custody and control of your assets when you deposit them onto Hyperliquid. On decentralized exchanges, everything happens transparently on-chain; there’s nowhere for bad actors to hide.

Why an order book?

We considered many models: AMMs, RFQ, and oracle based solutions that are popular with other protocols. These models make tradeoffs between computation and efficiency, which is a great way to get something up and running on a chain with limited throughput.

Specifically, AMMs are the simplest solution with the worst problems. AMMs suffer from front-running and MEV attacks. Many on Crypto twitter have published research showing how Uniswap LPs lose more money in impermanent loss than they gain from fees.

RFQ is a clever solution and might be optimal for bespoke block trades when liquidity is limited. However, as a general purpose solution it is too opaque, and the asymmetry between makers and takers leads to centralization. Furthermore, RFQs will never be the primary source of price discovery due to the limited throughput and their lack of transparency.

Oracle based solutions like GMX are a nice band aid solution when a centralized exchange such as Binance has high quality data and almost all of the liquidity. However, they are subject to oracle attacks and centralization risk (who gets to set the mostly arbitrary rules, time delays, position limits, etc?). They too can’t be a venue for true price discovery, only an auxiliary source of liquidity around an order book based oracle.

Order books are the only tested and sustainable solution at scale, as they let liquidity providers precisely control their risk, leading to capital efficiency and tighter spreads.

dApp-Chain vs dApp

It’s easier to build on an existing chain, and some pretty good solutions exist out there: Solana, Arbitrum, etc. However, none of these chains come close to being performant enough to run an order book at scale. When market makers need to pay a few cents per order or cancel, they quote much wider spreads, and the liquidity for end users ends up dramatically worse.

Given that order books are too useful to compromise on, we realized that we needed to build the blockchain to be performant enough for the exchange, and not the other way around.

Built on Tendermint, the Hyperliquid chain is performant enough to operate the whole exchange — every order, cancel, trade, and liquidation happens transparently on-chain with block latency <1 second. The chain currently supports 20,000 orders / second.

What can I trade?

Users can trade perpetual contracts of 20+ assets with just USDC as collateral, and up to 50x leverage. There is no size limit for trades, and all transactions can be tracked in the explorer.

Hyperliquid supports advanced trading features, including TP/SL orders and isolated and cross margin. Many popular features have been implemented: e.g., order modification directly from the TradingView chart.

What about gas and fees?

On DEXs, users typically have two main costs: gas fees and trading fees.

Hyperliquid will have a minimal gas fee paid in USDC for transactions on the network. Like all blockchains, this gas fee is necessary for protecting the chain against DDOS attacks. However, because the Hyperliquid blockchain runs only the optimized exchange state machine as opposed to general smart contracts, the gas fee will be negligible for users (<$0.001 per transaction).

Hyperliquid will have zero trading fees to start as well. Once a token is introduced, there will be a trading fee tied to that token, as well as rebates for makers. The fees will be competitive with the top centralized exchanges.

We will share more about the fees, tokenomics, and referral program in H1 23.

Join Hyperliquid’s journey

We do our best to respond to community feedback ASAP and ship quickly. Everyone is welcome to join our Discord server to take part and be the first to learn about updates and events. Ultimately, we want to build something that is a no-brainer for everyone in DeFi to use.