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 become a go-to platform for traders seeking to trade perpetual futures, also known as 'perps.' These blockchain-based derivatives contracts enable 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 been capitalizing on its volume and order book depth by providing firms with a unique opportunity to compose with its shared liquidity. This concept, inspired by DeFi's 'money LEGO' idea, allows permissionless smart contracts to interlock, creating new tokenized financial products. Hyperliquid's Ethereum-compatible HyperEVM connects directly to its high-performance HyperCore blockchain, enabling other applications to build on top of the platform's shared liquidity. This approach allows applications like wallets and exchanges to piggyback on Hyperliquid, using it as a backend to offer perps trading and other services. As a result, liquidity deepens, asset variety expands, and network effects compound. Hundreds of developers, including prominent names like MetaMask and Phantom wallet, have integrated Hyperliquid's 'builder codes,' generating over $90 million in revenue. The platform has garnered significant praise from its users, with Hyunsu Jung, CEO of Hyperion DeFi, describing it as 'the AWS for finance.' Hyperliquid provides the underlying liquidity and execution, while builders own their users and control the user interface. The platform's builder code integrators can charge fees on the notional size of their users' trades without developing the backend or maintaining liquidity. This approach enables integrators to focus on delivering a great user experience while Hyperliquid handles the backend. For example, MetaMask, a popular Ethereum-based wallet, has integrated Hyperliquid's EVM module, providing its users with self-custodial access to perps. The wallet's product manager, Matthieu Saint Olive, notes that Hyperliquid excels at matching orders, allowing MetaMask to offer high-quality liquidity and execution. The partnership has enabled MetaMask to expand its offerings beyond crypto, with Saint Olive reporting growth in commodities and equities trading. In terms of fees, MetaMask charges a flat 0.1% builder fee, with no hidden spread or execution costs. The transparency of this model is seen as a significant advantage, with Saint Olive exploring innovative pricing models to further enhance the user experience. Another notable example is the South Africa-based exchange VALR, which has opted to use Hyperliquid's perps order book for its liquidity requirements. Despite initially building its own infrastructure, including risk and liquidation engines, VALR found it challenging to achieve sufficient volume and liquidity. By partnering with Hyperliquid, the exchange has been able to tap into a vast pool of market participants and volume, providing its customers with better trading opportunities. Looking ahead, the growth of perps trading is expected to create opportunities for cross-venue arbitrage, according to Jung. As more prominent exchanges, such as Robinhood and Coinbase, enter the perps market, traders will be able to exploit price differences between venues, creating new revenue streams.