Author: TPBN

Translation: Wu Says Blockchain

This issue features an interview with Jeff Yan, the founder of Hyperliquid, conducted by the TPBN column. Jeff shares his journey from trader to entrepreneur and the impetus for rethinking the decentralized spirit of the crypto industry after the collapse of FTX. He discusses the birth of Hyperliquid, its technological philosophy, and development vision: committed to creating a fully decentralized, on-chain native financial system that will serve as the "underlying network" for all future financial infrastructure.

He delves into why he rejects traditional venture capital, how he draws inspiration from Satoshi Nakamoto's spirit to maintain protocol neutrality, and Hyperliquid's unique growth path in terms of branding and community. The interview also covers the mechanisms and innovative significance of perpetual contracts, team-building principles, and the brand philosophy driven by a decentralized community. The entire conversation not only reveals Hyperliquid's technical thinking but also showcases the balance that DeFi entrepreneurs strike between idealism and pragmatism.

The Birth and Vision of Hyperliquid

John: Welcome, Jeff, to the show, and thank you for taking the time. Most of our audience is familiar with technology but may know little about cryptocurrency. Could you briefly introduce yourself, your background, and your business? After that, we can dive deeper into various topics.

Jeff: Sure, it might be best to start with my story. In May 2022, we were a small team focused on cryptocurrency trading, primarily in DeFi and SCI-Fi. At that time, we realized we wanted to do something in the DeFi space because DeFi products were still in a very primitive stage. Basically, all the products were not very good, and as traders, we felt we could do better. Later, the collapse of FTX became the motivation for us to fully commit to building Hyperliquid. We suddenly realized that discussions about decentralization and self-custody in the crypto space had been written about in the past, but it seemed no one took them seriously. But suddenly, these issues became very important. People began to realize that "not your keys, not your coins." We had deviated from the original spirit of Satoshi and Bitcoin. So, we believed the world was ready to trade cryptocurrencies in a decentralized, self-custodial manner.

Fast forward to now, Hyperliquid has become a major on-chain price discovery venue, a fully on-chain financial system. Our goal has always been to build a platform that can ultimately support all financial activities. Although today it primarily serves as an exchange, it is not just an exchange. Notably, it is a trading platform that supports on-chain perpetual contracts, generating over a billion dollars in revenue annually, and in many ways, it has pioneered new paths.

Building Decentralized Protocols and Thoughts on Venture Capital

John: It's interesting to hear you say that. Most founders would say "we," but it’s clear you see yourself more as a guardian of this project, responsible for building and launching it. Do you view yourself this way? Is this how you think about the project?

Jeff: Yes, we have indeed drawn a lot of inspiration from Satoshi Nakamoto. I think the founder of Bitcoin is very unique, whether it’s him or them, it’s uncertain who it is, but if it is Satoshi, Bitcoin is indeed the first in many ways. Its uniqueness lies in the fact that it is not a traditional product; as you said, it is not a top-down company but a product. I believe the DeFi and cryptocurrency industry has also drawn a lot of inspiration from Bitcoin, after all, everything originates from Bitcoin, and there will never be another project as significant as Bitcoin. Many crypto projects still operate in a top-down manner; for example, centralized exchanges are a good case in point. While they are good business models, their core operations do not align with the native spirit of the crypto world. Therefore, Hyperliquid is based on this thinking, striving to establish a truly neutral protocol that will ultimately serve as the infrastructure for upgrading all financial systems.

John: So you don’t have venture capital? Can you explain this in detail? Is it because you have high capital efficiency and don’t need to raise funds, or do you have a particular philosophy about how venture capital should operate in the crypto industry?

Jeff: This indeed traces back to Satoshi. If Bitcoin had gone through an A round of financing in its early days, it might not be the Bitcoin we know today. Even the best investors in the world, with the most powerful investment desks, cannot change this fact. So I think venture capital actually provides a very important service to the world; they effectively allocate capital and help many projects develop. Although they are not always perfect, overall, I believe their contributions outweigh the negative impacts.

But in this case, I think when you are building a neutral protocol, there may be some important elements involving capital flow and trading on top of it. At this point, neutrality is more important than anything else. I believe there is a path dependency issue in this situation. If insiders dominate from the beginning, no matter how decentralized the supply, ideas, talent, and other resources are, it cannot avoid that "big bang" moment, which will leave a mark in the history of the protocol. So for any project being built, this early capital entry method will have an impact. I think financing and rapid expansion are viable strategies, but when you are building a project that needs to maintain neutrality in the long term, the historical impact is very important. We would rather take our time to ensure everything is done correctly.

Venture Capital, Market Competition, and the Original Intent of Hyperliquid

John: I want to continue discussing this issue. You cannot prevent venture capital from establishing positions in the public market, right? Suppose a major investment institution says, "We want 20% equity, and we will buy tokens in the public market to establish our position." Its performance will be like any other asset in our portfolio. Has this happened? Is this approach irrational? Are there legal structures that prevent them from doing this?

Jeff: You could make the same argument for Bitcoin. For example, many venture capitalists are major holders of Bitcoin. I know of several venture capitalists who got involved with Bitcoin very early on. So the issue is not who owns it, but its origin. It’s more of a principle issue. If you cannot claim that this platform is neutral and that anyone can come and build, while at the same time say, "These people had the opportunity to establish this platform first," then it is not perfect. Although from a practical perspective, any project that was born after Bitcoin needs to launch in a competitive market, and innovation must be funded, we still want to get as close as possible to Satoshi's ideals, which is still worth pursuing.

Jordi: So, did you know what you wanted to do from the start and execute that plan directly, or did you iterate along the way until you arrived at what you have today?

Jeff: I think we initially did not have a complete understanding of what we wanted to do. We just wanted to do some things we could do well, and even doing one thing well was difficult. At first, we focused on finding a big opportunity, and we discovered that there was a field in cryptocurrency that might really need a completely permissionless platform, and perpetual contract trading was an obvious choice. At that time, this type of trading might have accounted for over 50% of the revenue in the crypto market. We started from there. Importantly, we were unwilling to compromise on the principles of how it should operate from the very beginning.

Which Companies Have Particularly Inspired Hyperliquid?

Jordi: You learned a lot from FTX, avoiding those mistakes, and were inspired by Satoshi Nakamoto. So, are there any off-chain companies that have particularly inspired you?

Jeff: There are many. In fact, every large company, especially tech companies, has been very inspiring to me. I grew up in the Bay Area, so it’s hard not to be influenced by it. I think Amazon is a huge source of inspiration, especially in how they start from first principles, being both driven and very pragmatic. I think it was Bezos, and perhaps others realized that they had built most of the content of the internet stack, and if these technologies were only used for retail, wouldn’t that be a waste? Why not abstract it and create suitable APIs so that anyone can leverage the powerful infrastructure they built? That’s the story of AWS and cloud computing, and I think it’s a remarkable story.

This also reminds me of Hyperliquid; initially, it was an optimized blockchain specifically for on-chain perpetual contract trading because there was no other infrastructure capable of doing that at the time. Later, we gradually realized that many other areas in finance, ultimately the entire financial system, could benefit from this high-performance decentralized ledger. So it can be seen as a way to provide infrastructure for liquidity.

John: What do you think about Bezos's background at D.E. Shaw, where he was a trader? This may have influenced Amazon's shape to some extent. How does this compare to Google, which originated from academic research? What were you doing before this? Do you think you entered entrepreneurship with a trader's mindset?

Jeff: Yes, I think so. Although I don’t fully understand what type of trading Bezos was doing, at least automated trading is very much like doing physics. You make many approximations because you cannot be 100% accurate, as the market is inherently filled with randomness, and noise outweighs the signal, which is the beauty of the market. It’s like filtering signals from noise. This is completely different from the supervised learning setup in AI, where there is almost unlimited data and very high quality.

I feel that the process of building Hyperliquid has a similar feeling. In fact, we do not rely on a lot of data to drive decisions; we rely more on intuition. We just think very seriously about what the world should look like and try to do our best. Of course, if something obviously bad happens, we will adapt and adjust, but we do not deliberately create data, especially when the data is unreasonable. So we almost never use methods like A/B testing.

Introducing the Concept and Advantages of Perpetual Contracts

John: You have mentioned perpetual contracts (perps) several times. Can you provide a clear definition for our audience and explain what perpetual contracts are and why they are so appealing?

Jeff: Well, if you want to know what people are trading today, you can actually trade a specific asset, like Amazon stock. If you want some leverage, which allows you to make more money with less capital, there are two ways to do it. The first is to trade futures, which usually trade some indices, like the S&P 500. The basic concept of futures is that two trading parties reach an agreement, similar to a long and short contract. If the price of the S&P 500 moves by $1, the long side makes $20, while the short side loses $20. Futures contracts are usually settled through some underlying asset, for example, you are trading the price of the S&P 500 for the next three months or delivering a cow at expiration.

John: I understand. If it's a trade like corn futures, if I let the contract expire, I would ultimately have to deliver all the corn. But most Wall Street traders have long known how to avoid this situation. You've also heard of some strange cases, like oil prices turning negative, resulting in someone buying oil at a negative price and ultimately having to accept all the oil. Of course, in a purely financial context, this is clearly not the expected outcome. So, do perpetual contracts unlock higher-frequency trading, higher leverage, or a different type of trader, more quantitative or algorithm-driven trading? Who are the customers for these products? Why are they interested in such products?

Jeff: Yes, the reason they are interested is mainly because, as you said, futures trading actually has many issues, such as potential delivery problems. Sometimes you need to deliver, but most traders avoid delivery by constantly rolling their positions.

Take Robinhood as an example; the popularity of futures is far less than that of its options trading. For retail users, the appeal of options is significant because it’s similar to buying a lottery ticket. You can buy a ticket and feel great because the maximum loss is limited. However, the pricing of options is very complex, especially for retail users, particularly those using applications that do not provide sufficient information. You might get "rekt" because the structure of options is very complicated. It looks simple, with just the strike price and expiration date, but it’s actually hard to price.

Perpetual contracts combine the two assets of futures and options. You want to trade just the price of the underlying asset, want leverage, and don’t want to worry about expiration issues; that’s the significance of perpetual contracts.

Taking Bitcoin as an example, almost every exchange has a very liquid Bitcoin perpetual contract, which is the only liquid asset that never expires. All price discovery happens on these perpetual contracts, with billions of dollars traded in these Bitcoin contracts. It actually leads the price of the Bitcoin underlying asset. This is very useful for professional traders because they can trade it, and it is the most liquid Bitcoin trading tool. For retail users, it provides a clear and understandable price that is hard to get "rekt" on because there is only one market, and it is very liquid, with very small bid-ask spreads. Therefore, for many participants, this is a win-win situation.

Of course, there will always be some people who prefer options or traditional futures contracts, but overall, perpetual contracts are undoubtedly more attractive.

Network Scalability Bottlenecks and Decentralized Security

John: So, what are the biggest bottlenecks for network scalability like this? If the scale is very large, I’m more concerned about whether there are some token economics structures that encourage people to build entire data centers. Are there currently ASIC miners being built to run this network? I know Bitcoin was initially mined with personal computers, then evolved into data centers, and finally, to pursue the cheapest energy, ASIC miners were developed because the algorithm is very stable. So how does a network like Hyperliquid scale over time? What stage of scalability are you currently in?

Jeff: Yes, Bitcoin's situation is a bit special; it may be the only mainstream network still using proof of work (PoW). The ASIC miners you mentioned, all those crazy things like mining Bitcoin with volcanoes, are actually part of the consensus mechanism. Today, all other high-performance blockchains (at least as far as I know) use proof of stake (PoS), which is a more energy-efficient way. Its security is based on economic models rather than computational power. So on Hyperliquid, there isn’t much innovation in how the network maintains security. This issue is relatively simple; basically, everyone stakes local tokens. For Hyperliquid, this token is called "Hype." People stake it to indicate their endorsement of the network. Typically, this is similar to how you vote for elected officials; you are essentially choosing the validator nodes you trust. Thus, if a validator node does something bad, the tokens staked with them are at risk.

From an economic perspective, the system ensures network security through certain mathematical models. If the majority of the staked tokens in the network are honest, then the system can operate normally. If you want to gain enough staked tokens to do something bad (like double spending—spending the same dollar twice), you need to control a large amount of staked tokens. In simple terms, Hyperliquid's security does not rely on creating crazy ASIC miners but is based on economic models.

Brand and Community: The Power of Decentralized Marketing

Jordi: How important is branding to the success of Hyperliquid? Because I feel that you haven’t focused on brand building like traditional companies do, such as hiring advertising agencies, developing strategic plans, etc. I believe many of your competitors have these practices, but you have one of the strongest brands in the world. Just typing "Hyperliquid" anywhere globally and posting it can garner huge attention and excitement, which is truly remarkable. But I’m curious about how much this brand effect has played a role in your success compared to scale and other product decisions.

Jeff: Yes, I feel we are very fortunate that the power of the community is very strong. I don’t know how to describe this community; it might be close-knit, intense, but also very inspiring. Our team is actually very introverted, and we are small, only 11 people. We don’t even have dedicated marketing personnel. If we did, I think we might not do well.

In fact, it’s not just about the product itself; it’s more about the product and the community, the entire ecosystem. It consists of many different parts. For example, some people just post some tweets, and I think that’s really cool; I really like it. Others are building products on the platform, which I think is also a form of viral marketing. They build products on the protocol that create synergies with Hyperliquid itself, providing new things or expanding in certain ways. Most of the financial pillars on Hyperliquid are built by community members, and we hope this trend continues. Anything that can be built by the community will be completed by the community. I think this decentralized marketing approach is a reflection of decentralization, not only at the technical level but also at the social level, which is very important to us. That’s the brand of Hyperliquid—if one were to interpret it negatively, some might feel we are somewhat aloof or that we focus too much on technology and neglect marketing. But from this perspective, the ultimate result is something more powerful, which is that people feel a sense of ownership in this network, a feeling that Web2 companies cannot achieve.

Competition and Focus: Hyperliquid's Strategic Advantage

Jordi: This is also why those companies that want to capture your market share are often large financial enterprises with substantial capital, but it seems they encounter difficulties in real competition. Is it because there is a large community that all wants Hyperliquid to win? How do you view this advantage? Besides that, what other reasons make your reverse positioning difficult for competition?

Jeff: To be honest, we don’t pay much attention to daily competition. I feel there are too many things to do right now. You are right; many companies indeed want to do what Hyperliquid does or want to capture market share, but we don’t think too much about that. There are too many things to do. If I can succeed, it means doing something that no one else in the world has done. I think many times we get a bit anxious because of competitors trying to undermine the advantages Hyperliquid has established, but this also makes us overlook the bigger picture. After all, we still have a long way to go to reach our true goals.

The Vision of Hyperliquid: The Future of Finance and the Rise of DeFi

Jordi: How great is the potential of Hyperliquid? What are your ambitions?

Jeff: I see it as, if everything goes well, it will ultimately cover the entire financial field. You could say it’s the coordination of finance, which is the coordination of human behavior, not just finance itself.

Jordi: You’re basically saying that even if you don’t cover 100% of the total addressable market (TAM) of the global financial market, you will still have a huge impact on it?

Jeff: Yes, you ask how big it can be? I think that’s correct, but I don’t think it will directly change everything like replacing finance. My thinking is more like the impact of the internet on finance or the rise of electronic trading in the early 2000s. This has been over 20 years in the making, and it’s time to update the tech stack. I believe DeFi is that technological update.

Rapid Fire Q&A

The Future of Hyperliquid and Market Expansion

Jordi: I have a rapid-fire Q&A segment. I asked some friends in the crypto space what questions they wanted to ask you. I will quickly ask a few questions, and I hope you can answer briefly, as some questions are quite specific.

First, when will we see the first centralized exchange close their perpetual contract trading and only run a front end on Hyperliquid? When will they surrender?

Jeff: Within a year.

What are your thoughts on the U.S. market?

Jordi: What are your thoughts on the structure of the U.S. market? Under what circumstances would you consider bringing Hyperliquid to the U.S.?

Jeff: That’s a good question. We believe the U.S. is a very important market; it is clearly the global financial center, and the dollar is the reserve currency of capital. We very much hope, of course, that U.S. regulation can evolve and truly embrace DeFi. I think steps have already been taken in that direction. I can’t comment specifically, but I feel I’m a bit out of the loop on this issue because changes are happening very quickly. To be honest, I think there are many very smart people working on this. I’ve heard of initiatives like setting up exemptions for decentralized front ends, and I think those are really cool.

Why do some centralized exchanges say Hyperliquid doesn’t want to be listed?

Jordi: Why do some centralized exchanges say Hyperliquid doesn’t want to be listed?

Jeff: Have they said that? I don’t know. I don’t really care about that issue. We don’t want anything; I think we are more focused on continuous building. Some exchanges have already listed Hype, and I think that’s cool. Other exchanges may feel it doesn’t align with their priorities, and I think that’s cool too. We actually don’t deal much with these institutions.

Are there plans to support native multi-asset margin?

Jordi: Are there plans to support native multi-asset margin?

Jeff: I think that will definitely happen, but I don’t fully know the specific implementation path. The concept of native multi-asset margin doesn’t have a clear definition yet, but I believe it will happen. If we are to accommodate all finance, we should definitely be able to trade using different types of collateral.

When will perpetual contracts for commodities and U.S. stocks be launched?

Jordi: When will perpetual contracts for commodities and U.S. stocks be launched?

Jeff: There are already some perpetual contracts, such as the perpetual contract for gold. As for when other commodities and stock perpetual contracts will be launched, I expect it might be next year, as HIP 3 will unlock many features, essentially allowing anyone to deploy their own perpetual contracts.

What is the most commonly misunderstood aspect of Hyperliquid?

Jordi: What do you think is the most commonly misunderstood aspect of Hyperliquid today?

Jeff: There are many misunderstandings. The most common misconception is that many people think Hyperliquid is just a perpetual contract exchange or that it is a centralized entity. In fact, it is not; it is a blockchain network with permissionless validator nodes. Currently, there are 24 validator nodes, and anyone can join. The top 24 nodes ranked by staked amount will form the validation set. Each validator node executes all transactions, including all orders. This means that the underlying structure of Hyperliquid is actually decentralized, which is often overlooked. People tend to focus more on its products, which may be a good thing because it means the technology is abstracted for users.

Does Jeff miss the Bay Area?

Jordi: Do you miss the Bay Area? What do you miss?

Jeff: I miss Chick-fil-A (laughs). In fact, I miss the mountains more. Although they are not in the Bay Area, Singapore is very flat. It’s a great place to live, with a good environment for work, but I do miss the natural scenery like Yosemite.

John: When I was in Singapore, many people said that Singapore lacks a strong local culture, perhaps because there isn’t an underground cultural atmosphere like punk culture. Do you feel you have found a good community in Singapore? Do you like the culture here? Are you optimistic about the future direction of this country?

Jeff: To be honest, I’m too busy right now to delve into the culture. Singapore is a great place—safe, modern, with delicious food, and the air conditioning is fantastic. Overall, it’s quite livable. Honestly, at this stage in my career, I’m not paying much attention to culture. If I were in New York now, I probably wouldn’t care much about that either.

What are the standards for team building and talent recruitment?

Jeff: To be honest, we are not very good at recruiting. I have to say, we are always hiring and constantly looking for talent. I know many people listening to this podcast are very smart. If anyone is interested in systems engineering and high-performance computing and wants to build infrastructure for the future of finance, I genuinely believe this is the best workplace, and we warmly welcome you to join our team.

Our team is very small, only 11 people, and the standards are very high. I think our standards might be among the highest in the industry. I believe we are one of the most efficient engineering teams.

But we are working hard to expand, and there are indeed many things to do. We maintain very high standards in many aspects, including capability and integrity, which we value greatly. If any listeners meet these standards, we warmly welcome you to join us.

Are you hiring for positions that support remote work?

Jeff: For new members, we currently only support in-person work. Initially, we supported remote work, but we found that this approach did not fit our work style very well.

What is your view on the 996 work culture?

Jeff: I think the most important thing is the quality of work. I feel that everyone has different work intensities, and people will feel fatigued at different points in time, which is also very important. Personally, I work more than 996 hours, but that’s because I feel I have no limits; I personally feel there are no restrictions, but everyone’s situation is different.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。