The true decentralization of Hyperliquid: A double-edged sword in a non-intervention market The 'ETH Whale Liquidation' event in March 2025 was essentially a form of legal economic manipulation. The attacker deposited funds and opened a high-leverage ETH long position (around 20x leverage, with a nominal value of $271M). After the position became profitable, they gradually withdrew unrealized profits (totaling approximately $17M), artificially lowering the margin health factor to precisely trigger the liquidation mechanism—not due to natural losses, but by intentionally creating a 'toxic position.' As a result, Hyperliquid's HLP Vault (liquidity provider) was forced to take over this position worth over $200M, leading to a $4M loss for the Vault, while the attacker netted $1.8M in profit. This incident exposed the risks of providing liquidity on the platform: the HLP Vault, as the 'final bag holder,' is vulnerable to exploitation by whales. Following the event, Hyperliquid fully transitioned to a decentralized model, no longer offering internal liquidity and shifting to pure P2P (customer-to-customer) trading. Profits are directly earned by the winning party from the losing party, with no platform intervention. While this enhances decentralization, it also amplifies market manipulation risks. For example, the recent XPL cascading liquidation event: attackers (suspected to be multiple coordinated addresses) aggressively went long on XPL with position sizes ranging from $500K to $5M, pushing the price up 200% from its low to $1.8 (compared to Binance contracts, where the highest price was only $0.6176). Due to the platform lacking market makers, arbitrage bots, and having extremely low liquidity, all short positions were liquidated in a cascade, instantly 'draining' approximately $2M in short funds. The attack was entirely 'legal,' but it highlights the downside of a no-market-maker model: low-liquidity assets are prone to pump-and-dump schemes, leaving ordinary users vulnerable. In summary, Hyperliquid's decentralization reform avoids internal intervention but magnifies external manipulation risks. Users need to be cautious of high leverage and small-cap asset risks. The platform may need to introduce more robust mechanisms in the future (such as sliding leverage or liquidity incentives) to strike a balance.