Hyperliquid Revolutionizes DeFi with Composable Liquidity

The concept that liquidity breeds liquidity is exemplified by Hyperliquid, a decentralized exchange that has gained popularity among traders, particularly those interested in perpetual futures or 'perps'. Founded by Harvard alumni Jeff Yan and iliensinc, Hyperliquid has been live since early 2023 and is now capitalizing on the depth and volume of its order book by offering a unique concept: composability. This DeFi concept allows permissionless smart contracts to interlock seamlessly, much like LEGO blocks, to create novel tokenized financial products. Hyperliquid's Ethereum-compatible HyperEVM is directly connected to its high-speed, homegrown HyperCore blockchain. This setup enables other applications to build upon the platform's shared liquidity, rather than fragmenting it. As a result, applications such as wallets or even other exchanges can utilize Hyperliquid as a backend to offer perps trading and other services, effectively creating a network effect. As more developers integrate with Hyperliquid, the platform's liquidity deepens, and the variety of assets expands. Currently, hundreds of developers, including prominent names like MetaMask, Phantom wallet, and VALR, are utilizing Hyperliquid's 'builder codes', generating approximately $90 million in revenue. The platform has garnered significant praise from its users, with Hyunsu Jung, CEO of Hyperion DeFi, describing Hyperliquid as 'the AWS for finance'. Jung emphasizes that the platform's true value lies in its ability to provide liquidity and execution, rather than just being a perpetuals exchange. Similar to AWS, builders on Hyperliquid own their users and have full control over the user interface, while the platform provides the underlying liquidity and execution. This setup allows builder code integrators to charge fees on the notional size of their users' trades without having to develop and maintain the backend or liquidity. For instance, MetaMask, a popular Ethereum-based wallet with over 100 million users worldwide, has integrated Hyperliquid's EVM module. This integration enables MetaMask users to access perps directly from their wallets, streamlining fund transfers and allowing users to trade with the tokens they already hold. According to Matthieu Saint Olive, Staff Product Manager at MetaMask, the integration with Hyperliquid has been seamless, with the platform handling matching, oracle, and margin engine tasks. MetaMask charges a flat 0.1% builder fee, with no hidden spread or execution costs, providing transparency for traders. The partnership between MetaMask and Hyperliquid has also led to growth in areas beyond crypto, such as commodities and equities. Saint Olive notes that real-world-asset markets have become a significant portion of perp volume, growing from a small slice to roughly a quarter of the total volume. Another notable example is VALR, a large centralized exchange in Africa, which has opted to utilize 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 for its perpetual futures. Looking ahead, the DeFi landscape is expected to evolve, with opportunities for cross-venue arbitrage emerging as major players like Robinhood, Coinbase, and Intercontinental Exchange enter the perps market. According to Jung, this will create opportunities for traders to maintain positions on multiple platforms, leveraging non-toxic flow to generate organic funding rates.