Hyperliquid Revolutionizes DeFi with Composable Liquidity

The concept that liquidity breeds liquidity is particularly relevant to Hyperliquid, a decentralized exchange that has gained popularity among traders, especially those interested in perpetual futures, also known as 'perps'. Launched in 2023 by Harvard alumni Jeff Yan and a developer known as iliensinc, Hyperliquid has harnessed the power of its deep order book by introducing a concept from DeFi known as composability. This allows permissionless smart contracts to be combined like financial building blocks, creating new tokenized financial products. The platform's Ethereum-compatible HyperEVM is directly connected to its high-speed HyperCore blockchain, allowing other applications to utilize Hyperliquid's shared liquidity. This means that wallets and other exchanges can leverage Hyperliquid as a backend, offering perps trading and other services without having to develop their own infrastructure. As more developers integrate with Hyperliquid, the platform's liquidity deepens, and the variety of assets expands. This, in turn, creates a network effect, with hundreds of developers, including prominent names like MetaMask and VALR, utilizing Hyperliquid's 'builder codes'. These developers have generated approximately $90 million in revenue so far. According to Hyunsu Jung, CEO of Hyperion DeFi, 'Hyperliquid is not just a perpetuals exchange; it's more like the AWS for finance'. Jung highlights that the platform provides liquidity and execution, while builders own their users and control the user interface. Similar to AWS, Hyperliquid allows builders to focus on delivering a great user experience while providing the underlying liquidity and execution. This enables integrators to charge fees on the notional size of their users' trades without having to develop and maintain their own backend or liquidity. The integration with MetaMask, a wallet with over 100 million users worldwide, is a prime example of this. By combining with Hyperliquid's EVM module, MetaMask has given its users self-custodial access to perps directly from the wallet. This streamlined process allows users to trade directly with the tokens they already hold, eliminating the need for a separate dApp or fund transfers. Matthieu Saint Olive, Staff Product Manager at MetaMask, notes that 'matching orders is genuinely hard, and Hyperliquid is excellent at it'. By routing orders directly to the Hyperliquid order book, MetaMask Perps offers some of the best liquidity and execution quality available. MetaMask is seeing growth beyond crypto, with real-world-asset markets now accounting for roughly a quarter of perp volume. The company charges a flat 0.1% builder fee, with no hidden spread or execution costs. Even large centralized exchanges, such as VALR, are leveraging Hyperliquid's perps order book. Despite initially building their own infrastructure, including risk and liquidation engines, VALR found it challenging to achieve sufficient volume and liquidity. By plugging into Hyperliquid, they can now offer their customers access to a deeper liquidity pool. Looking ahead, as more prominent players enter the perps market, there will be opportunities for cross-venue arbitrage. This will enable users to maintain positions on multiple platforms, such as Robinhood and Hyperliquid, and capitalize on differences in funding rates.