Hyperliquid Revolutionizes DeFi with Composable Liquidity

The concept of liquidity begetting liquidity is a fundamental principle in the world of finance. Hyperliquid, a decentralized exchange, has emerged as a top choice for traders seeking to engage with perpetual futures, also known as 'perps.' These blockchain-based derivatives contracts allow users to speculate on asset prices with leverage and no expiration date. Founded by Harvard classmates Jeff Yan and iliensinc, Hyperliquid has been live since the start of 2023 and has capitalized on the volume and depth of its order book by introducing a composable liquidity concept. This DeFi concept enables permissionless smart contracts to interlock like building blocks, creating new tokenized financial products. Hyperliquid's Ethereum-compatible HyperEVM connects directly to its high-performance HyperCore blockchain, allowing other applications to tap into the platform's shared liquidity without fragmenting it. As a result, applications like wallets and other exchanges can utilize Hyperliquid as a backend, offering perps trading and other services. The more builders deploy and integrate with Hyperliquid, the deeper the liquidity, the broader the range of assets, and the more pronounced the network effects. Currently, hundreds of developers, including prominent names like MetaMask, Phantom wallet, and VALR, are leveraging Hyperliquid's 'builder codes,' generating approximately $90 million in revenue. The platform has garnered significant praise from its growing user base. According to Hyunsu Jung, CEO of Hyperion DeFi, 'Hyperliquid is not just a perpetuals exchange; it's more like the AWS for finance.' Jung views Hyperliquid as a layer-one blockchain infrastructure that provides liquidity and execution, allowing builders to own their users and control the user interface. The 'builder codes' enable integrators to focus on delivering a great user experience while Hyperliquid handles the underlying liquidity and execution. This approach allows integrators to charge fees on the notional size of their users' trades without developing the backend or maintaining liquidity. For applications like MetaMask, integrating with Hyperliquid makes sense, as it provides users with self-custodial access to perps directly from the wallet. Being a wallet offers advantages, such as streamlined fund transfers, allowing users to trade directly with the tokens they already hold. MetaMask has seen growth beyond crypto, with real-world-asset markets expanding from a small slice of perp volume to roughly a quarter of it today. In terms of fees, MetaMask charges a flat 0.1% builder fee, with no hidden spread or execution costs. The company values transparency and is exploring innovative pricing models to make its economics a reason for users to choose MetaMask. Even large centralized exchanges, like VALR, have opted to use Hyperliquid's perps order book for liquidity requirements. Despite initially building their own infrastructure, including risk and liquidation engines, VALR found it challenging to achieve the desired volume and liquidity for perpetual futures. By plugging into Hyperliquid, VALR can now offer its customers access to a deeper pool of liquidity. Looking ahead, as more prominent players enter the perps market, opportunities for cross-venue arbitrage will emerge, according to Jung. This will enable users to maintain positions on multiple platforms, such as Robinhood and Hyperliquid, and capitalize on differences in funding rates.