Hyperliquid First Look: The Complete Onchain Financial Stack - Figment

Hyperliquid First Look: The Complete Onchain Financial Stack

Luke Streckenbach
Protocol Opportunities Analyst
Published: April 10, 2025

What is Hyperliquid

Hyperliquid is a new Layer 1 blockchain purpose-built to provide a comprehensive foundation for onchain finance. With a native, ultra-performant perpetuals and spot exchange, a general purpose EVM environment, and a number of net new primitives, Hyperliquid has rapidly emerged as a strong competitor to both centralized exchanges and general-purpose Layer 1s. Hyperliquid has undeniably been among the most successful new network launches of the past few years – read on to learn what all the HYPE is about.

Hyperliquid Architecture

Hyperliquid’s execution layer is split between two top-level native components: HyperCore and HyperEVM. HyperCore houses native primitives that support an ultra-high-performance exchange including onchain orderbooks, native oracles, staking, and vaults while HyperEVM provides a general-purpose smart contract platform where developers can build applications that interact with the native primitives on HyperCore.

Importantly, both HyperCore and HyperEVM exist as a shared state and are secured by Hyperliquid’s unified consensus protocol, HyperBFT. This allows the two components to specialize in different use cases while retaining the ability to seamlessly interoperate with each other.

This novel architecture can be understood as a hybrid between an app-specific blockchain and a general purpose chain, in many ways offering the best of both worlds to end users and developers. HyperCore is able to provide a best-in-class onchain trading experience largely due to its integration into the protocol itself, while HyperEVM provides general purpose functionality that is fully interoperable with HyperCore’s native components.

This design leads to a whole that is greater than the sum of its parts. Central limit orderbook exchanges are among the most throughput intensive and latency sensitive applications in all of crypto. HyperCore’s ability to handle 200K orders per second with a 70ms block time means it can handle an unprecedented amount of trading activity onchain. On pure general purpose chains, the premier exchange has to share blockspace with all other smart contract applications built on the network. On Hyperliquid, the flagship exchange has its own execution lane that handles core exchange functionality natively. In addition to the inherent exchange performance benefits this offers as compared to building on top of general purpose smart contracts, it also leaves a larger portion of HyperEVM’s throughput for all other apps that rely on smart contract capabilities.

In essence, Hyperliquid’s hybrid design can be viewed as a novel approach to scaling a general purpose platform for finance just as much as it can be viewed as a way to maximize performance for the core application. While HyperEVM throughput is set low initially, it will increase over time – the most important part of the initial rollout was not to affect the performance of HyperCore components. Depending on the measurement used, the platform as a whole may be considered more scalable than many of the fastest general purpose L1s even though HyperEVM's current total throughput capacity is lower than its general purpose competitors today.

HyperCore

The Hyperliquid Exchange

By initially building the Layer 1 infrastructure around the flagship orderbook exchange, the Hyperliquid Exchange enjoys a number of advantages over those built on general purpose L1s.

HyperCore offers a CEX-comparable trading experience that provides an excellent UI/UX and can handle the needs of professional traders who have historically been largely limited by latency and liquidity requirements to centralized venues. This is in part thanks to opinionated design choices informed by the Hyperliquid team’s trading background and made possible by direct integration with the broader protocol.

One example is the fact that cancellation orders take precedence over market orders during HyperCore block construction. This may seem like a small detail, but it’s extremely important since it gives makers a very slight advantage when they need to update their quotes, providing protection against toxic flow from other high frequency traders that may look to exploit a latency advantage to “pick off” out of date pricing. As a result of this protection, market makers are able to quote tighter and thicker liquidity around the assets they trade, which ultimately provides a significantly better trading experience for end-users on the platform. As an interesting aside, Loracle and Stalequant (two longtime Hyperliquid market makers) believe that this design choice means that when using volume as a proxy for retail usage, Hyperliquid actually has an inherent handicap. Because centralized exchanges do not have this built-in market maker protection, a material amount of volume traded on most CEXes is high frequency traders arbitraging each other. Since Hyperliquid prevents this with a speed bump at the block construction level, there is far less of this arbitrage activity on Hyperliquid, which results in “understated” volume metrics.

The Vault Primitive

Hyperliquid’s Vault primitive allows end-users to contribute USDC to strategies managed by a third party (which can be discretionary or automated) and earn a share of the profits or losses. Initially, the Vaults were built to enable end-users to provide liquidity directly to the market making strategies operating through the HLP vault to provide liquidity on the exchange. As outlined in an early blog post, the primary motivation behind doing so was to demonstrate to end-users that the core team was not building Hyperliquid for the purpose of profiting from market making strategies. After some consideration, the core team thought that users might find the feature useful and decided to make vault creation permissionless. While many vaults today are run by retail end users, vaults provide the technical foundation for a marketplace of end-user accessible professional trading strategies to develop on Hyperliquid over time.

Native Oracles

The Hyperliquid exchange relies on pricing data provided by each validator to compute funding rates for perpetual futures. Validators periodically publish spot oracle prices, taken as a weighted median of multiple exchange prices including major Centralized Exchanges and Hyperliquid itself. The final oracle price used is the stake-weighted median of each validator’s submitted oracle price. This approach eliminates risks posed by third party oracles by integrating oracle pricing with the validators securing the protocol itself.

HyperEVM

While HyperEVM is still in the very early stages of development at the time of writing, it has its own opinionated design choices intended to provide builders with a specialized environment for deploying financial applications that can interoperate with HyperCore’s native components.

Dual-Block Architecture

One such choice is HyperEVM’s dual-block architecture, which splits total HyperEVM throughput between small blocks that happen quickly and larger blocks that happen less frequently. The HyperEVM mempool is split into two independent mempools that source transactions for each of the two block types.

This design decouples block speed and block size, enabling incremental improvements to be made on each axis separately without the need to accept a forced tradeoff between the two. Users benefit from faster blocks with lower time to transaction confirmation, while builders benefit from larger blocks to more easily include large transactions like contract deployments.

Currently, fast blocks have a block time of 2 seconds with a 2M gas limit, while slow blocks have a 1 minute block time with a 30M gas limit. These are conservatively set initial configurations which are expected to be steadily increased over time.

Precompiles

HyperEVM’s interoperability with HyperCore is achieved through precompiles, which are capable of reading from and writing to HyperCore state. This enables novel DeFi use cases that tap into both HyperCore’s perpetuals and spot exchanges and HyperEVM's general purpose smart contract layer.

Ecosystem

Hyperliquid has a very strong pipeline of builders, many of whom are Hyperliquid-native and/or deploying their apps and products exclusively on Hyperliquid. We’ll highlight a few of these teams below:

Product Innovation

In addition to its novel protocol architecture, Hyperliquid also meaningfully differentiates with a number of integrated products and features that aim to provide users and builders with everything they need to use Hyperliquid as a platform for onchain finance.

Hyperliquidity Provider (HLP)

HyperCore’s Vault primitive was initially designed to enable the HLP (Hyperliquidity Provider) vault. HLP has democratized access to sophisticated market making strategies and the ability to perform liquidations, both of which typically provide extremely strong risk-adjusted rewards.

Builder Codes

Builder codes enable third party developers to build on top of HyperCore, taking a fee on fills they send on behalf of users. Conceptually, builder codes work similarly to broker programs on centralized exchanges, but with the difference that the implementation is transparent, open, and permissionless.

Token Launch Support

HIP-1: Native Token Standard

Hyperliquid’s HIP-1 token standard allows projects to permissionlessly create capped-supply spot assets. The pricing to launch a new token is transparent and based on a dutch auction model.

HIP-2: Hyperliquidity

Where HIP-1 provides a token standard for spot assets, HIP-2 provides a mechanism for projects to seed newly-issued assets with liquidity. Inspired by Uniswap, Hyperliquidity enables deployers to define and fund a passive liquidity provision strategy.

Usage Metrics

With ~$1.1 trillion in perpetual futures volume settled, Hyperliquid has undeniably won over a very significant portion of users who trade onchain. It has steadily become the most dominant onchain perpetual futures protocol by a significant margin.

Tokenomics

The HYPE token plays a number of roles including acting as the native staking asset for validators and delegators. HYPE holders can delegate their stake to earn a ~2.3% SRR (Staking Rewards Rate). HYPE is also the native gas token on HyperEVM.

The Hyperliquid Team

Hyperliquid is built by a small but talented team that comes from a professional trading background. After FTX collapsed, they shifted focus to building Hyperliquid for an onchain trading experience that met the needs of professional traders.

Recent Incidents and Responses

While Hyperliquid has been successful, recent incidents included an attack attempt on the HLP vault. The Hyperliquid team quickly responded to adjust requirements for users who wish to transfer margin out of open positions on the exchange.

Hyperliquid Outlook

Hyperliquid consistently settles billions of dollars of trading volume a day, demonstrating a strong track record for security and robustness despite recent attack attempts. By supporting both onchain trading and general purpose smart contract capabilities, it enables the full lifecycle of DeFi protocols.