Hyperliquid Revolutionizes DeFi with Composable Perpetual Futures

The concept that liquidity breeds liquidity is being taken to new heights by Hyperliquid, a decentralized exchange that has become the go-to platform for traders seeking to trade perpetual futures, also known as 'perps'. Launched in 2023 by Harvard classmates Jeff Yan and a pseudonymous developer known as iliensinc, Hyperliquid is leveraging its robust order book to offer firms a unique opportunity to compose with its shared liquidity, rather than fragmenting it. This concept, known as composability, is inspired by decentralized finance (DeFi) and allows permissionless smart contracts to interact seamlessly, much like building blocks of LEGO. Hyperliquid's Ethereum-compatible HyperEVM is directly connected to its high-performance HyperCore blockchain, enabling other applications to build upon the platform's shared liquidity. This allows wallets and exchanges to piggyback on Hyperliquid, using it as a backend to offer perps trading and other services without having to develop their own infrastructure. As a result, liquidity deepens, and the variety of assets expands, creating a snowball effect. Hundreds of developers, including prominent names like MetaMask, Phantom wallet, and VALR, are now using 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'. Jung highlights that Hyperliquid is more than just a perpetuals exchange; it's a layer-one blockchain infrastructure that provides liquidity and execution, allowing builders to focus on delivering a great user experience. Similar to AWS, builders using Hyperliquid's platform own their users and have full control over the user interface, while Hyperliquid provides the underlying liquidity and execution. This enables builder code integrators to charge fees on the notional size of their users' trades without having to develop and maintain their own backend or liquidity. For instance, MetaMask, a popular Ethereum-based wallet with over 100 million users worldwide, has integrated Hyperliquid's EVM module, allowing users to access perps directly from their wallet. This integration has streamlined fund transfers, enabling users to trade directly with the tokens they already hold. According to Matthieu Saint Olive, Staff Product Manager at MetaMask, the integration with Hyperliquid has been seamless, with Hyperliquid handling matching, oracle, and margin engine tasks. This allows MetaMask to focus on delivering a great user experience, while Hyperliquid provides the necessary liquidity and execution. The partnership has also led to growth beyond crypto, with MetaMask seeing increased interest in commodities and equities. Saint Olive notes that real-world-asset markets have grown from a small fraction 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 prioritizes transparency, with Saint Olive stating that they are actively exploring innovative pricing models to make their economics a reason for users to choose MetaMask, rather than a source of friction. Another notable example is VALR, a large centralized exchange in South Africa, which has opted to use Hyperliquid's perps order book for its liquidity requirements. Despite having built its own infrastructure, including risk and liquidation engines, VALR struggled to achieve sufficient volume and liquidity for its perpetual futures. According to Farzam Ehsani, CEO and co-founder of VALR, the exchange decided to integrate with Hyperliquid due to its impressive volume and market participation. By plugging into Hyperliquid's platform, VALR can offer its customers better liquidity and execution, without having to develop and maintain its own infrastructure. Looking ahead, as major players like Robinhood, Coinbase, and Intercontinental Exchange enter the perps market, there will be opportunities for cross-venue arbitrage, according to Jung. This could lead to more organic mechanisms for funding rates, as users take advantage of price differences between platforms. For instance, a user maintaining a position on Robinhood and the other side of the position on Hyperliquid could benefit from non-toxic flow, where retail users enter and exit the market, creating opportunities for funding rates.