Hyperliquid Revolutionizes DeFi with Composable Perpetual Futures

The concept that liquidity breeds liquidity is being put to the test by Hyperliquid, a decentralized exchange that has quickly become the go-to platform for traders of perpetual futures, also known as 'perps'. Founded by Harvard classmates Jeff Yan and iliensinc, a pseudonymous developer, Hyperliquid has been live since the beginning of 2023 and has been capitalizing on the volume and depth of its order book by providing firms with the ability to compose with its shared liquidity, much like money LEGOs, allowing for the creation of new tokenized financial products. The Ethereum-compatible HyperEVM and the high-performance HyperCore blockchain work in tandem, allowing other applications to tap into Hyperliquid's liquidity, rather than fragmenting it. This enables applications, such as wallets and exchanges, to utilize Hyperliquid as a backend, providing perps trading and other services to their users. As more developers integrate with Hyperliquid, the platform's liquidity deepens, the variety of assets expands, and network effects compound. With hundreds of developers, including prominent names like MetaMask, Phantom wallet, and VALR, utilizing Hyperliquid's 'builder codes', the platform has generated approximately $90 million in revenue, according to Flowscan. Hyperliquid has garnered significant praise from its users, with Hyunsu Jung, CEO of Hyperion DeFi, describing it as 'the AWS for finance'. Jung highlights that the platform provides a layer-one blockchain infrastructure, offering liquidity and execution, while allowing builders to own their users and control the user interface. Similar to AWS, Hyperliquid provides the underlying liquidity and execution, while builder code integrators charge fees based on the notional size of their users' trades, without having to develop or maintain the backend or liquidity. Sterling Barnett, business development lead at Hyperliquid Labs, notes that 'builder codes enable integrators to focus on delivering a great user experience, while Hyperliquid handles the backend for liquidity and execution'. The integration with MetaMask, a wallet with over 100 million users worldwide, is a prime example of Hyperliquid's capabilities. By fusing with Hyperliquid's EVM module, MetaMask has provided its users with self-custodial access to perps directly from the wallet. Matthieu Saint Olive, Staff Product Manager at MetaMask, highlights that this integration allows for streamlined fund transfers and enables users to trade directly with the tokens they already hold. The partnership with VALR, a large centralized exchange in Africa, is another notable example. Despite initially building its own infrastructure for perpetual futures, VALR found it challenging to achieve sufficient volume and liquidity. By integrating with Hyperliquid, VALR has been able to tap into the platform's vast liquidity pool, providing its users with better trading opportunities. Looking ahead, the potential for cross-venue arbitrage is significant, particularly when major players like Robinhood and Coinbase enter the perps market. According to Jung, this will create opportunities for more organic mechanisms for funding rates, as users will be able to maintain positions on multiple platforms, taking advantage of non-toxic flow and other market dynamics.