Hyperliquid Expands DeFi Horizons with Shared Liquidity and Composability

The concept that liquidity breeds liquidity is a fundamental principle in the world of finance. Hyperliquid, a decentralized exchange, has become a go-to platform for traders seeking to engage with perpetual futures, also known as 'perps.' These blockchain-based derivatives contracts allow users to speculate on asset prices with leverage and no expiration date. Founded by Harvard classmates Jeff Yan and a pseudonymous developer known as iliensinc, Hyperliquid launched in 2023 and has been capitalizing on its order book volume and depth by introducing a composability feature. This DeFi concept enables permissionless smart contracts to interlock like building blocks, creating new tokenized financial products. Hyperliquid's Ethereum-compatible HyperEVM is directly connected to its high-speed HyperCore blockchain, allowing other applications to build upon the platform's shared liquidity without fragmenting it. This means that applications such as wallets or other exchanges can utilize Hyperliquid as a backend to offer perps trading and other services. As more developers integrate with Hyperliquid, the platform's liquidity deepens, the variety of assets expands, and network effects intensify. Currently, hundreds of developers, including prominent names like MetaMask and Phantom wallet, are utilizing Hyperliquid's 'builder codes,' generating approximately $90 million in revenue. The platform has garnered significant praise from its growing user base. Hyunsu Jung, CEO of Hyperion DeFi, describes Hyperliquid as 'the AWS for finance,' emphasizing its role as a layer-one blockchain infrastructure that provides liquidity and execution. Builders own their users and control the user interface, while Hyperliquid provides the underlying liquidity and execution. The 'builder codes' allow integrators to focus on delivering a great user experience while Hyperliquid handles the backend. Integrators can charge fees on the notional size of their users' trades without developing the backend or maintaining liquidity. For instance, MetaMask, a popular Ethereum-based wallet, has integrated with Hyperliquid's EVM module, enabling users to access perps directly from the wallet. This integration has streamlined fund transfers, allowing users to trade with the tokens they already hold. MetaMask has seen growth in perps trading, with real-world-asset markets increasing from a small fraction to roughly a quarter of the total volume. The wallet charges a flat 0.1% builder fee, with no hidden spread or execution costs. The transparency of the fee structure is seen as a significant advantage. Even large centralized exchanges, such as South Africa-based VALR, have turned to Hyperliquid for liquidity requirements. Despite initially building their own infrastructure, including risk and liquidation engines, VALR struggled to gain traction with their perpetual futures offerings due to liquidity and volume issues. By integrating with Hyperliquid, VALR has been able to tap into the platform's vast volume and market participants. Looking ahead, the potential for cross-venue arbitrage opportunities is expected to arise as more prominent players enter the perps market. This could lead to more organic mechanisms for funding rates, as users maintain positions on multiple platforms.