What is Hyperliquid(HYPE)? The core token of a decentralized exchange that leads the new trend in the DeFi market

What is Hyperliquid? Basic Knowledge of HYPE Token

In late November 2024, HYPE rapidly gained recognition through a major airdrop, and it is the native token of the decentralized exchange Hyperliquid. It functions not just as a speculative asset but as a project building infrastructure capable of competing with centralized exchanges in the DeFi market.

Hyperliquid addresses structural issues traditionally faced by DEXs, such as liquidity shortages and trading delays, using proprietary technology to provide a trading experience comparable to CEXs in a decentralized environment.

Basic Specs of HYPE Token

On November 29, 2024, 31% of the total supply (about 310 million tokens) was distributed to active users during the testnet phase. Many participants received tokens worth hundreds of thousands of dollars, making it an industry notable airdrop.

Technological Advantages of Hyperliquid

Hyperliquid’s platform is supported by four innovative technological foundations. Their integration has enabled the creation of a high-performance trading environment previously difficult to realize in DeFi.

Custom-designed Layer 1 Blockchain

Hyperliquid Chain is designed specifically for trading functions, capable of processing 200,000 transactions per second. This far exceeds Visa’s (~1,700/sec) and Mastercard’s (~5,000/sec) figures.

With an ultra-low block generation time of 0.07 seconds, it offers near real-time trading experiences. This rapid responsiveness allows traders to execute at optimal timing even in highly volatile crypto markets.

HyperBFT Consensus Mechanism

The proprietary HyperBFT algorithm is Byzantine fault-tolerant, functioning securely even if up to one-third of network participants act maliciously.

This mechanism’s security is maintained through HYPE staking, where token holders contribute to network security, creating a system where they help uphold protocol integrity.

Fully On-Chain Order Book

Moving away from traditional AMM models, Hyperliquid adopts an on-chain order book where buy and sell prices are directly matched. This design significantly reduces slippage during large orders.

All order data is recorded on the blockchain, ensuring complete transparency and meeting the trust standards required by institutional investors.

Perpetual Derivatives Trading

Perpetual futures have no expiration date, allowing investors to hold long-term positions. Leverage of up to 50x is available, with automatic price adjustments via funding rates.

Using high leverage involves risks such as liquidation, sudden price swings, and liquidity issues, requiring careful risk management.

Multiple Functions and Roles of HYPE Token

Trading Fee Optimization Tool

Users paying fees with HYPE receive discounts, with a six-tier system based on staking amounts. The highest Diamond Tier (over 500,000 HYPE) offers up to 40% discount, providing significant long-term cost savings for frequent traders.

Rewards from Staking

Launched in December 2024, the staking feature allows depositing HYPE to one of 16 validators. In return, participants receive periodic rewards for contributing to network security. The lock period is relatively short at 1 day, maintaining liquidity while earning rewards.

Governance Voting Rights

HYPE holders can participate in key decisions regarding protocol management, such as fee structure changes, new feature implementations, and fund allocations. Community consensus determines platform policies.

Gas Token on HyperEVM

Launched in February 2025, HyperEVM is EVM-compatible, enabling easy migration of existing smart contracts and dApps. HYPE functions as the gas fee, and integration with Hyperliquid’s native features greatly enhances DeFi ecosystem scalability.

Price Stabilization Mechanism

A “HYPE Assistance Fund,” funded partly by transaction fee income, conducts continuous buyback strategies, maintaining price stability even after large airdrops. Some repurchased tokens are burned, reducing total supply and increasing scarcity.

Unlike typical post-airdrop price drops, HYPE’s steady performance indicates this mechanism is effective.

Market Competitiveness and Growth Potential

Achieving CEX-like Performance in a Decentralized Manner

Hyperliquid uniquely offers a decentralized platform with matching speed and liquidity comparable to CEXs. Near-zero gas fees support all trade sizes, from small to large, and full on-chain transparency builds trust among institutional investors.

Accelerating Ecosystem Expansion

Currently supporting over 160 derivative pairs and more than 20 spot trading pairs, further expansion is planned. The full deployment of HyperEVM will enhance interoperability with other DeFi protocols, evolving into a comprehensive financial infrastructure.

Developer support programs are expected to lead to rapid growth in dApps built on Hyperliquid, making this a critical period for demand expansion.

Establishing a Presence in the Meme Coin Market

Successful meme coins like “PURR” and “POINTS” on Hyperliquid are positioning it as a new hub for meme coin markets. Permissionless listings enable quick market entry for trending tokens, increasing overall trading volume and fostering a healthy ecosystem cycle.

Risks to Consider for Investment Decisions

Concerns About Smart Contract Vulnerabilities

There is a possibility of unforeseen vulnerabilities in the protocol design. For example, in March 2025, a price manipulation incident involving “JELLY” tokens led to emergency liquidations. Risks include liquidity shortages in certain trading pairs, slippage issues, and technical failures due to the protocol’s early stage.

Risks Specific to Perpetual Futures Trading

Leverage of up to 50x amplifies both gains and losses, with the potential for total loss of invested capital through liquidation in a short period. Manipulation risks in low-liquidity assets and costs from funding rates can also impact profitability. As an overseas project, Japanese legal protections do not apply, which is an important consideration.

Current Price Trends and Market Evaluation

Since listing on November 29, 2024, HYPE has risen from about $1.8 at listing to $25.61 (as of January 2026), approximately a 14-fold increase.

This performance is highly regarded in the industry, positioning it among top projects by market cap. It demonstrates strong technical utility and investor support for the token.

Key Questions and Answers About Hyperliquid

How to Participate in Staking

Simply transfer HYPE to the staking account on Hyperliquid, select a validator, and specify the staking amount. Many investors are already using this feature to earn stable rewards, with a 1-day lock period maintaining higher liquidity compared to other DeFi projects.

Possibility of Additional Airdrops

No official announcement has been made, but 38% of the total supply is reserved for community rewards, leaving room for further distribution. Ongoing trading, staking participation, and governance involvement may influence future airdrops, but no guarantees exist. Investment decisions should not be based solely on airdrop expectations.

Summary: Why Hyperliquid and HYPE Are Gaining Market Attention

Hyperliquid(HYPE) is designed around four pillars: technological innovation, community focus, practicality, and sustainable growth.

Its high processing capacity, on-chain order book, user-centric design independent of VC funding, value preservation through large airdrops and buyback strategies, and demand creation via multiple use cases collectively support its project value.

However, understanding the risks associated with DEX smart contracts and the high-risk nature of perpetual futures trading is essential. Conduct thorough market research and careful analysis to make investment decisions aligned with your risk tolerance.