Recently, I've been extremely busy and unable to write a lengthy research report. I'll change my writing style and directly state my viewpoints and reasoning. I hope the readers can understand~

1. Research Background

I have recently studied almost all the Perps (perpetual trading platforms) available in the market. The hype market's fivefold growth once again proves that my initial judgment last year overlooked its core value.

Moreover, with recent entries from aster, antex, dydxV 4, and even Sun Ge, the sunPerps that have shaken the track are gradually bringing the Perps sector into an explosive period.

Additionally, major exchanges are competing to launch hype and the perpetual trading capabilities on their platforms. Just yesterday, it was reported that Metamask, following Phantom, is planning to integrate Hyper's perpetual trading, with Circle also becoming a validator, alleviating concerns about its core decentralization. Hyperliquid is also striving to enhance its openness, especially with the gradual rollout of hyperEVM and hip 2/3/4.

1.1 Three Key Elements of the New Track

At this point, Perps can be considered to possess the three key elements of a new track.

In fact, if we look back at any significant wave in history, we can see that it often involves new leading platforms, new wealth opportunities, and new narrative backgrounds. The convergence of trends brings peaks, while subsequent platform airdrop strategies, the increasing complexity of platforms, and the diminishing novelty perceived by users eventually lead to troughs.

This process has already gone through many waves, with typical scenarios as follows. Each module has been analyzed in previous articles on the "Shijiu Jun" public account, which can be referenced if interested:

• The ICO frenzy in 2017 corresponded to CEX platforms. The basic demand was undeniable, and many are still thriving today.
• The DeFi summer of 2021 corresponded to platforms like Uniswap, lending, and stablecoins, similar to the previous point.
• The NFT boom in 2022 had protocols that existed long before but peaked due to OpenSea, rooted in pricing through trading and subsequent dissemination based on price. Its decline stemmed from arrogance in airdrop strategies and royalties, leading to a death spiral of price chasing, which was self-inflicted.
• The inscription trend in 2023 corresponded to the Unisat platform, whose decline was due to shortsightedness, focusing solely on asset issuance at the peak without developing applications, resulting in a very short narrative lifecycle. When other new narratives emerged, RWA and Perps captured attention, making it difficult for recent Alkanes and BRC 2.0 to regain popularity, also self-inflicted.
• In 2024, both RWA (focusing on stocks) and Perps (led by Hyperliquid) will emerge simultaneously.

2. Interpretation of Key Development Steps for Hyperliquid

2.1 Current Development Status

Objectively speaking, the system is still in a relatively centralized state, theoretically capable of pulling the plug and changing its status. Moreover, there are hacker funds involved, which is a significant bottleneck for many exchanges in terms of compliance and heat integration. However, its data is quite contradictory.

Currently, Hyperliquid has about 10,000 to 20,000 active users daily, with a total user base of approximately 600,000. Among them, 20,000 to 30,000 core users contribute nearly $1 billion in revenue, a significant portion of which comes from the United States.

It has accumulated over $30 trillion in trading volume, with an average daily trading volume approaching $7 billion.

Currently, it supports Perps trading for over 100 assets.

Looking at its data, it can only be said to be exceptionally good, and while the user base may not be large, it consists of the most capital-generating individuals.

2.2 Major Updates and Interpretations

The specific timeline is as follows:

• March 25: Opened HyperCore and HyperEVM connections, theoretically allowing users to trade core tokens from EVM (limited to trading at that time).
• April 30: Launched the ability to read precompiled functions, enabling HyperEVM smart contracts to read states from HyperCore.
• May 26: Halved the block duration to 1 second, increasing HyperEVM's throughput.
• June 26: Updated HyperEVM blocks, removing the previous sorting of only published orders to improve integration with HyperCore.
• July 5: HyperEVM updated a new precompiler named CoreWriter, allowing HyperEVM contracts to write directly to HyperCore, including placing orders, transferring spot assets, managing treasury bonds, and staking HYPE.
• Recently, there has also been Builder Core and Hip 4, entering the data prediction market. This unexpected move indicates that the founders have a unique perspective on industry pain points, which often leads to polarization of the platform.

How should we understand this series of updates?

First, compared to last year, Hyperliquid has opened core order operation capabilities.

HyperEVM

Especially with the EVM-based dual-chain architecture, the logic is quite outrageous. It adds a large number of precompiled contracts and integrates with HyperCore without opening (or deploying) HyperCore, theoretically allowing for wallet (Phantom, Metamask) and exchange integrations, enabling EVM trading operations to execute Core's order asset buying and selling capabilities.

The official has a diagram that reflects the positioning of HyperEVM in the system.

It can be seen that both writing and reading from HyperCore and HyperEVM are confirmed by HyperBFT, and the specific confirmation mechanism for validators has not been disclosed, with no cross-chain bridges or delayed synchronization.

The dynamics observable through on-chain transactions indicate that HyperEVM can influence HyperCore through system contracts (0x333…3333, CoreWriter.sendAction(...)), allowing for order placement, liquidation, and lending operations.

The state feedback from HyperCore (from the previous block) is available for HyperEVM's smart contracts to read.

• User Data—Positions, Balances, and Vault Information
• Market Data—Mark Prices and Oracle Prices
• Staking Data—Delegator and Validator Information
• System Data—L1 Block Count and Other Core Metrics

The essence of the information is received by the EVM's system contracts, generating corresponding receipts or events for recording. In the EVM, precompiled contracts (0x000…0800) can call perp positions or oracle price (oraclePx).

Secondly, the implementation of hip 2 and hip 3 is changing Hyperliquid's platform positioning.

Hyperliquidity

This is an on-chain liquidity mechanism built into Hypercore.

It automatically places buy and sell orders based on the current price of tokens without manual intervention, maintaining a narrow price spread of about 0.3%.

This mechanism allows for native-level liquidity insertion operations without AMM or third-party bots, embedded within block logic.

For example, when the PURR/USDC spot market was launched, initial seed trades for depth were immediately placed, allowing for real trading before normal user liquidity arrived. Hyperliquidity

Builder Core

This is a mechanism with significant future value, allowing for additional fees to be charged as service income. The application scenarios for this are very clear, representing a move to open profits and welcome ecological co-construction. DeFi builders (developers, quantitative teams, aggregators) place orders on behalf of users.

• Quantitative Strategy Hosting: Quantitative teams help users place perp position orders, charging management fees through builder fees, forming a "revenue sharing + builder fee" composite profit model.
• Aggregator/Trading Routing: For example, 1 inch, Odyssey, etc., integrate perp trading services on Hyperliquid, charging builder fees as a routing income model.

The initial launch has already brought over $10 million in dividend income to some projects, demonstrating the effect of hyper capital depth solidifying at the platform level.

In fact, opening depth is not just something Hyper is doing; Uniswap V4 also aimed to do this through hooks, but V4 did not gain much traction, as most users still prefer V2 and V3.

Perhaps this is the influence of having fewer historical burdens and stronger centralized decision-making.

3. Summary and Comments

3.1 Many Advantages, Let's Go Through Them One by One

Hyperliquid's primary advantage is its strong early product capability, as it addresses two user pain points:

• The trading needs of non-compliant users, which have become even rarer amid this year's compliance wave.
• The needs of advanced trading users for high leverage and high transparency, the former brings exposure for KOLs, while the latter is often overlooked by existing market ideologies, hence catching many CEXs off guard.

Secondly, the team's background itself is a significant advantage. Its biggest strength is its small size, leading to high communication efficiency, reduced wear and tear, and overall high productivity. With a team of just over a dozen people, excluding 3-4 for product operations and business development, and accounting for front and back end, it essentially relies on just 3-4 individuals to create a high-performance chain with 20 WTPS.

Compared to many traditional large company's blockchain teams, which often produce a lot of internal drama, this is quite remarkable.

In its background, it started as a market maker in 2020, which provided a solid initial depth. You can also sense its matching logic in many details, which is not simply settled by time or amount like other order book systems.

However, due to insufficient data, I will supplement this when doing comparative analysis of multiple Perps in the future.

Then there's the trend.

Generally, projects need to adapt to the market, but when a platform's popularity peaks, it can make the market adapt to it.

Currently, Hyperliquid enjoys such treatment.

On one hand, the openness in the updates above provides space for various ecosystems to enter. Compared to many past platforms that often think about doing everything themselves and reaping all the benefits, openly criticizing OpenSea while also creating a forced royalty system that makes the market follow the leaders, there are always fixed high costs involved, which interferes with the flow of goods and affects the true pricing in the market, ultimately becoming a family heirloom.

In contrast, Hype has opened up EVM and various DEX Peps APIs, leading to a rapid emergence of derivatives in the market.

Hyperliquid's generosity is also evident in its airdrops; from the beginning, it was not able to pursue a compliant route.

Therefore, it does not attempt to embrace the so-called expectations of going public, naturally allowing profits to be released. By using the Hlp mechanism to stake Hype back, it reinvests profits, allowing the official token to be decentralized, gaining the market's rarest decentralized evaluation and reputation.

Its openness has attracted market attention, with Phantom first integrating its Perps capabilities from the perspective of a decentralized wallet. This is not particularly difficult, mainly involving significant adaptation and development costs. Recently, it has also been reported that Metamask is integrating.

This also shows that those decentralized wallets that have not updated for over half a year, after missing the inscription opportunity, have come to understand the importance of capturing annual narratives.

Finally, it has also pushed to introduce giants like Circle as validators, bringing decentralized security and filling its decentralization gap, thus providing a compliant CEX platform with integration opportunities.

3.2 Now, Let's Discuss the Drawbacks

After overcoming the most challenging initial phase, the compliance issue arises. Even pure DEXs like Uniswap are embracing compliance, let alone users who have made their fortunes with Hyperliquid in Europe and the U.S.? If it is deemed non-compliant or labeled with other serious titles, existing CEX/Wallet collaborations will be severed, and former allies will part ways.

Additionally, this system will face the complexity of development in the future. Most projects become increasingly complex, making it difficult to simplify and return to first principles, ultimately causing novice users to struggle and lose fresh blood.

Lastly, there is the risk of single points of failure. The currently claimed 20 WTPS, if integrated by multiple global platforms, will lead to numerous inconsistencies in information, putting immense pressure on the core HyperCore module. This high-performance construction is not achieved overnight. The official background as a market maker may not withstand the traffic, especially if multiple liquidation issues arise due to outages (similar to the short squeeze incident in March).

Thus, the hard-earned reputation is inherently fragile.

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