1. Hyperliquid’s Success Factors

Hyperliquid’s success factor can be broken down into three core pillars:

Performance-first design

• HL launched its specialized L1, HyperCore, with the bold thesis that a purpose-built chain could deliver the low and predictable latency that a performant CLOB requires. At the time, most of DeFi still revolved around AMMs and general-purpose rollups, neither capable of deterministic, low-latency execution. Hyperliquid instead built a sovereign appchain that vertically integrates consensus, execution, and smart contracts under one validator set. At the base of this architecture is HyperBFT, a HotStuff-style Byzantine Fault Tolerant consensus mechanism tuned for sub-second finality and deterministic transaction ordering, ensuring that orders, cancels, and fills are sequenced fairly and predictably. This design effectively eliminates traditional MEV paths and provides the consistency market makers need for high-frequency strategies. HyperCore, the Rust-based execution layer, runs atomic matching and liquidations with one-block settlement, while isolating each market to enable parallel throughput and stable latency even under stress. Together, these components form a tightly coupled system that combines CEX-grade responsiveness with full onchain transparency, processing up to 200,000 transactions per second with 0.07s median block times.

Token and timing alignment

• 99% of $HYPE fees going to the buyback mechanism created a constant buying pressure. As dYdX struggled with its v3 → v4 migration (2024) and GMX volumes plateaued, HL surged. With strong incentives (points, airdrop rewards, deflation/buybacks, high yield), great market maker adoption, and relentless infra optimization, HyperLiquid grew exponentially.

Community sovereignty

• From mid-2024, HL consistently led onchain perps volume. By 2025, it became the venue, rivaling even Binance in certain pairs. As of writing Hyperliquid has achieved a 15% share vs Binance Perps volume.

With HyperEVM live and HIP-3 introduced, it has expanded Hyperliquid to more than a perps exchange, making it a decentralized programmable platform supporting greater innovation. HyperEVM added the Ethereum Virtual Machine (EVM) to the Hyperliquid L1 network, enabling users to build apps while working with Hyperliquid SDKs and frameworks to create their own trading products.

These success factors created the sentiment of HL as "Binance onchain”, while it for the first time beat Robinhood for three months straight in trading volume at $330b vs $237b.

2. From Launch to Dominance

Three years ago, Hyperliquid didn’t exist and the onchain perpetual market was dominated by AMMs like GMX and other platforms like dYdX v3.

GMX, built on @arbitrum and @avax, popularized decentralized perps through its $GLP liquidity pool model, where traders opened positions against a shared basket of assets. While innovative, this design limited capital efficiency and exposed LPs to inventory risk, often resulting in wide spreads during volatility.

dYdX v3, meanwhile, operated with an offchain order book and onchain settlement on StarkEx, offering better execution but relying on centralized infrastructure for matching. This hybrid model improved UX but compromised on transparency and self-custody.

At that time, DeFi perps were constrained by poor capital efficiency, high collateral requirements, and latency that couldn’t compete with centralized exchanges. Hyperliquid changed that. By launching a fully onchain CLOB with sub-second execution and deep liquidity, it redefined what was possible for decentralized perpetual trading.

HL combined speed of execution with onchain transparency and verifiability. The appchain approach, with its own L1, order-book and EVM, pioneered a new blueprint for onchain finance infrastructure. Newer competitors like dYdX v4, @tradeparadex, and @Lighter_xyz emerged, yet Hyperliquid maintained a clear performance edge due to its architecture (custom HyperBFT consensus and HyperCore engine) that enabled lower latency, higher stability, and smoother execution.

With these statistics and metrics, Hyperliquid is seen as a new foundation for a $1T+ onchain economy. But numbers don’t speak for themselves. They’re backed by the up to now unmatched technical architecture that combines the best of both worlds, from the speed and user experience of CEXs with the execution layer, efficiency and transparency of DeFi.

3. Technical Architecture Explained

HyperBFT, HyperCore, HyperEVM, and HIP-3 are integral components of Hyperliquid’s L1 blockchain, each serving distinct yet complementary roles.

HyperBFT

HyperBFT is the backbone consensus mechanism of Hyperliquid, based on the HotStuff consensus algorithm. Built to optimize low-latency and high-throughput transaction processing, it ensures sub-second finality (~0.07s) and total transaction ordering, eliminating Miner Extractable Value (MEV) risks by preventing orderbook manipulation.

This deterministic consensus enables HyperCore’s trustless, CEX-like orderbook (good UX, speed and predictability) and supports HyperEVM’s DeFi capabilities, unifying everything under a single, secure validator set.

With HyperBFT, validators produce blocks proportionally to staked $HYPE, similar to Ethereum’s PoS model. A rotation mechanism, alternating between validators, prevents single-point failures, crucial for decentralized systems.

HyperCore

At the heart of Hyperliquid lies HyperCore, a specialized RustVM-based execution layer designed from the ground up for orderbook trading and financial primitives.

Unlike EVM-based systems, which are general-purpose and optimized for broad smart contract execution, RustVM is purpose-built for deterministic, high-throughput state transitions. Every order, cancel, trade, and liquidation settles atomically onchain with one-block finality.

HyperCore achieves this by tightly coupling execution with HyperBFT consensus, ensuring that:

• Atomic state transitions: Pending orders in the mempool are consumed and applied in a single deterministic sequence, preventing reordering or partial execution mid-block.

• Efficient memory pool management: Instead of handling arbitrary contract calls, the RustVM maintains specialized data structures for order queues and margin states, allowing thousands of order updates per second without bottlenecks.

• Deterministic matching: The onchain orderbook is finalized in a canonical order, eliminating MEV vectors that plague EVM rollups where multiple execution traces may exist.

• Parallelized execution: Independent markets can process trades concurrently, scaling throughput beyond 200,000 orders per second in stress tests.

• Extensibility via builder codes (HIP-3): HyperCore allows DeFi builders to plug directly into its CLOB infrastructure, earning fees on fills executed on behalf of users while setting per-order parameters for maximum flexibility. This same mechanism enables third-party UIs and external protocols to integrate seamlessly with Hyperliquid’s orderbook, extending liquidity access and reinforcing network effects.

HyperCore is effectively an exchange-matching engine embedded into the blockchain, secured by HyperBFT's consensus. This design choice created Hyperliquid’s defining advantage: a trustless orderbook that feels like it’s centralized, but isn’t.

HyperEVM

Launched February 18th, 2025, HyperEVM is HyperLiquid’s smart contract execution layer that runs on the same validator set and consensus as HyperCore. Unlike modular ecosystems with fragmented validator incentives, HyperEVM and HyperCore are unified under HyperBFT.

• Unified security model: Hyperliquid eliminates the fragmented validator incentives common across most L2 ecosystems. In many rollup-based architectures, trading, settlement, and DeFi layers rely on separate sequencers or validator sets, each with its own incentives and latency risks, leading to inconsistent finality and occasional cross-domain delays. Hyperliquid unifies these under a single validator set that secures both trading (HyperCore) and DeFi execution (HyperEVM), ensuring synchronized finality, consistent performance, and shared slashing guarantees across the entire network. Builder access to HL primitives: Protocols can deploy specialized CoreWriter contracts that plug directly into HyperCore features such as liquidation engines, oracles, and perp markets. This allows builders to write to the orderbook itself (e.g., executing collateral liquidations, triggering perps trades, or consuming liquidity) without relying on external middleware.

• Dual-block architecture: HyperEVM employs separate transaction queues, one optimized for high-throughput trading activity, and another for more complex contract execution. This separation ensures that perps trading is never bottlenecked by long-running smart contract calls, while builders still benefit from full EVM expressiveness.

• Boosts composability: HyperEVM primitives enable novel applications like tokenized perps, delta-neutral vaults, structured products, and real-time hedging strategies, already drawing 175+ builders. Apps can also access HyperCore’s deep liquidity and real-time price feeds natively, reducing reliance on external oracles.

• EVM compatibility: Based on the Cancún EVM specification (without blob support), HyperEVM includes the EIP-1559 fee mechanics with both base and priority fees burned, and is fully compatible with standard Ethereum tooling such as Hardhat, Foundry, and other dev frameworks.

HyperEVM expands HL from a single-purpose exchange into a generalized DeFi settlement layer, while retaining the performance advantages of its specialized infra. Builders gain the flexibility of the EVM environment, but inherit HyperCore’s execution-grade orderbook and liquidity engine, a combination that no other onchain ecosystem currently matches.

HIP-3 (Builder Perps)

The most significant upgrade as of recently has been HIP-3, which introduced “builder perps”. A framework that allows external developers to create and operate their own perpetual markets directly on Hyperliquid’s infrastructure. Instead of relying on centralized listing or exchange approvals, builders can deploy new markets permissionlessly, using HyperCore’s liquidity and matching engine under the same security and settlement guarantees.

Each builder market shares liquidity with the broader Hyperliquid ecosystem while earning a portion of trading fees from their own pairs, creating a new incentive layer for onchain innovation. This upgrade effectively transforms Hyperliquid from a single exchange into a market-as-a-service platform, where anyone can launch specialized derivatives. By decentralizing market creation, HIP-3 expands Hyperliquid’s reach beyond its native perps, accelerating ecosystem growth and liquidity depth across all assets.

It gives the Hyperliquid ecosystem flexibility by enabling external teams to list and maintain their own perp markets. Stake 500k $HYPE (~$22M) to deploy custom perps via Dutch auctions (every 31 hours). For Liquidity, they can leverage HL’s shared collateral and orderbook infra. The result is vastly expanded asset coverage, from long-tail tokens to innovative synthetic markets. Deployers control oracles, leverage (up to 50x), fees and capture 50% revenue, the rest goes to the protocol.

HIP-3 effectively turns HL into a market platform, creating strong network effects as more teams build and more liquidity concentrates. Beyond crypto perps, HIP-3 opens the door for entirely new classes of assets, options, equities, commodities, forex, and indices. Additionally, it democratizes access. The permissionless market challenges CEX gatekeeping, with potential to capture market share from the more than trillion dollar global derivatives market.

Each new market adds to user acquisition, trading volumes, and fee generation, while the shared collateral and orderbook infrastructure ensures liquidity scales efficiently across assets.

4. Path to Product-Market Fit

On the technical architecture, HL’s foundation team made two crucial bets:

Specialized L1

Instead of building on Ethereum or deploying as a rollup, Hyperliquid was designed as a sovereign appchain purpose-built for high-frequency trading. This architectural choice allowed the team to control every layer of the stack: consensus, execution, and settlement, optimizing specifically for throughput and latency. The result is HyperCore, a custom Rust-based execution environment capable of parallel processing and deterministic state updates, ensuring trades finalize in under one second with total order consistency. By removing dependency on external sequencers or L2 data availability layers, Hyperliquid avoids the latency and congestion bottlenecks that limit rollup performance.

At the same time, running on its own L1 provides transparent onchain settlement and shared validator security across both trading and DeFi modules. Every order, cancellation, and liquidation is recorded directly onchain, maintaining full auditability.

CLOB-first architecture

Hyperliquid committed to a CLOB from day one, a design proven to scale in traditional markets and better suited for high-volume derivatives. Unlike AMMs, which depend on pooled liquidity and suffer from slippage and inventory risk, a CLOB structure allows direct price discovery, tighter spreads, and precision execution for professional traders. For perpetuals specifically, where high leverage and rapid liquidation thresholds demand predictable fills, the CLOB approach delivers far more reliable performance. This choice positioned Hyperliquid to attract serious market makers and institutional flow early, unlocking real depth and setting a precedent other onchain perps later followed.

The specialized L1 over L2s opt-ins for more control over the execution layer, while the CLOB approach over AMM gives more precision of trades without slippage. HyperEVM atop the same consensus ensures seamless composability.

The result is an onchain perp DEX and L1 that is fast, liquid, and fully transparent. Hyperliquid executes trades with sub-second finality, supports deep liquidity suitable for large positions, and maintains 100% onchain matching and settlement with no offchain engines or hidden intermediaries. Its architecture combines the reliability of centralized execution with the auditability of DeFi, setting a new benchmark for what an exchange-grade blockchain can achieve. By building performance and transparency directly into the protocol, Hyperliquid has created a sustainable advantage that continues to define its dominance in onchain perpetual trading.

Community & Liquidity Bootstrapping

In addition to the technical architectural choices, HL mastered the points system at the right timing. Early on, the team combined a transparent points system with high-yield HLP vaults that offered triple-digit APYs during the first months, rewarding traders, incentivizing liquidity and creating anticipation for airdrops.

This created a HyperLiquid flywheel bootstrapping it to success.

The community flywheel became self-reinforcing: more users -> more fees/volume → more liquidity → better UX → more users. Traders were incentivized to stay active to maximize points, while liquidity providers earned sustainable yields from real trading fees, not just token emissions.

Following the airdrop of 31% of total supply to 94,000 early users, this mechanism accelerated adoption dramatically. The HLP vault continued to generate consistent returns even after yields normalized. Within three months, Hyperliquid onboarded roughly 300,000 new traders, pushing its total user base to around 700,000, one of the fastest growth curves in DeFi.

The absence of VC funding allowed Hyperliquid to differentiate itself from the industry norm, dedicating 76.2% of its supply to the community rather than the usual 30%, hence eliminating the high VC concentration common in most DeFi projects.

5. Moat Analysis

Hyperliquid Flywheel

As of today, user experience (UX) remains Hyperliquid’s strongest moat. With traders and market makers increasingly concentrated on the platform, supported by its highly optimized technical infrastructure, switching to another venue has become economically and operationally suboptimal.

With appchain-specific L1 infrastructure, sub-second latency, and deep orderbooks tailored for traders, Hyperliquid gave users a reason to stay onchain. This shift in experience helped redefine the market standards, proving that AMMs were not capital-efficient for perpetuals once a performant onchain CLOB became available.

At the same time, Hyperliquid introduced genuine technical innovation that can’t be replicated through a simple fork. You can’t fully copy Hyperliquid because it isn’t defined by a single component, it’s the tight integration of its custom L1 (HyperCore), low-latency consensus (HyperBFT), programmable environment (HyperEVM), and matching engine architecture that delivers its performance.

These layers are deeply interdependent, optimized to function as a unified system rather than modular code that can be cloned. In addition, several elements remain closed-source, including key parts of the matching engine and validator coordination logic, further preventing a one-to-one fork.

Hence, HL's moat is multifaceted. Technological superiority through an architecture that enables unique features, unparalleled liquidity gravity and significant market depth, as well as maintaining fees that few if any competitors can currently match, combined with a strong network lock-in of its user base.

The compound effect here becomes devastating for competitors. Every day Hyperliquid's liquidity deepens, increased trading volume (as HL consistently achieved new ATHs up until August 2025), and more builders integrate (via frontends or HyperEVM apps).

On another front, Hyperliquid's $HYPE buyback mechanism forges a powerful link between trading activity, protocol revenue, and token value. The Assistance Fund (AF) captures 99% of net protocol fees, totaling at $105M in August 2025 from $357B derivatives and $3B spot volume, wherein it all goes to automated $HYPE buybacks.

This flywheel, where volume drives fees, fees drive buybacks, and buybacks drive scarcity, reducing the circulating $HYPE supply by about 3.2% up to date.

Competitive Landscape

Before Hyperliquid’s rise, the decentralized perpetual futures market was fragmented, dominated by early players like dYdX and GMX, which together held 80% of the $50B monthly volume in 2023, leveraging Ethereum L2s and AMMs with high fees and limited scalability.

CEXs like Binance and Bybit controlled the broader derivatives market, offering superior speed but lacking trustlessness, especially shown by the FTX downfall. Hyperliquid disrupted this landscape with CLOB-based architecture, capturing ~30% of the $200B onchain perp market as of September 2025.

Current competitors like Lighter, EdgeX, and @Aster_DEX compete via airdrop incentives, lower fees, or modular designs. Each chase volume via airdrops, low fees, or modular architecture rather than deep infrastructure differentiation.

Let’s break down some of HLs competitors in greater detail:

• dYdX v4, a Cosmos-based CLOB appchain, decentralizes matching with an off-chain order book and on-chain settlement, offering high throughput (10-20 trades/sec, 1-2s latency) for derivatives.

• GMX employs a hybrid AMM/CLOB model on Arbitrum, merging pooled liquidity with order-book precision for improved capital efficiency.

• EdgeX focuses on liquidity depth and aggressive incentives, with $16M monthly revenue from a $43B volume in August, expanding rapidly via its points program.

• Lighter, a zk-rollup perps DEX on Starknet, features zero-fee trading and verifiable matching.

• Aster, a multi-chain planned to be ZK-perp DEX (BNB, Ethereum, Solana), uses yield-bearing collateral (asBNB, USDF), privacy orders, and a multi-step airdrop to draw retail and cross-chain capital, hitting an average of $1.5B weekly volume.

• Paradex, a Starknet appchain, offers 250+ markets, zero retail fees, and Stark-verified settlement for reduced costs. Did $7.7B in volume in August and jumped to $17B in September.

Hyperliquid's Competitive Landscape

Hyperliquid’s advantage lies in its integrated performance, architecture, and liquidity, which are difficult to replicate through fee reductions or modular approaches. Its infrastructure moat remains substantial, as most competitors either inherit AMM-related inefficiencies or face the challenge of bootstrapping deep liquidity from scratch. Some pursue hybrid AMM–CLOB models, while others experiment with gamified trading or incentive-driven growth. So far, none have fully beat Hyperliquid’s core model.

6. The HyperLiquid Endgame

Hyperliquid envisions expanding beyond perpetual futures and structured products, leveraging its high-performance L1 to capture a broader share of DeFi’s $1.8T derivatives market. The endgame vision is akin to an “Everything Exchange": i.e. a permissionless platform housing all financial markets. Some of the upcoming developments are:

• Core protocol: HIP-3 mainnet unlocked new markets;

• USDH launch (post-Sep 14 vote) injects $5B+ liquidity, 95% yields to buybacks. Won by Native markets.

• Perps deployed on @phantom wallet (routing through HL) or @ranger_finance

In the bull case, Hyperliquid emerges victorious, consolidating spot, perps, stablecoins and lending into a single trustless platform with CEX-like performance. Its liquidity flywheel, driven by HIP-3’s revenue-sharing and fee buybacks, compounds its ~30% market share (down from its ATH at 70%), while HyperEVM’s ecosystem entrenches Hyperliquid as critical DeFi infrastructure, attracting 175+ builders and fostering innovative applications.

Conversely, the bear case underscores risks of liquidity fragmentation from emerging CLOB rivals like Lighter, Paradex, Bullet, Monaco and others, each gaining traction with zk-rollups, low-latency architectures, or incentives that could siphon volume and TVL.

Hyperliquid’s infrastructure moat could weaken if these players replicate part of its technical edge and distribution strategy. While overexpanding into untested areas like structured products risks diluting focus and straining resources, potentially undermining dominance in onchain derivatives. HL competitors are not strangers to good onchain infrastructure, each building out their own verticals, striving for increased market share and trading-venue domination.

Beyond speculative scenarios, a real concern for Hyperliquid is validator concentration, currently at 21 nodes, necessitating team efforts to expand the set for true decentralization. Additionally, upcoming token unlocks for the 23.8% team allocation (totaling $11-12B across 24 months starting November 2025) are causing debates and uncertainty among the community. However the fair unlock time, buyback pressure and token burns serves as a powerful counter to that pressure.

Bull and Bear Case for Sustained Dominance

We crafted a valuation framework for Hyperliquid that looks at its potential across perps, spot trading, and the growing HyperEVM ecosystem, imagining a future where it keeps capturing market shareof the massive CEX dominance with its unique revenue engine.

On the optimistic side, we picture an "Everything Exchange", with HIP-3 opening up new markets, $HYPE could soar to $120+ as the annual revenue keeps climbing. The ecosystem’s TVL could grow to $10 billion+, and $HYPE could crack the top 10 cryptos by market cap.

A more conservative outlook sees Hyperliquid gradually losing market share and fee momentum as competitors like Lighter, EdgeX, or Aster continue drawing users through short-term airdrop incentives and points farming. The open question is whether these new entrants can retain their liquidity post-TGE or whether users, once incentives fade, will migrate back to Hyperliquid’s deeper markets and stronger execution layer.

Conclusion

Hyperliquid is not merely the largest onchain perp DEX. It is the first protocol to prove that a self-custodial CLOB can dominate, reshaping DeFi’s competitive landscape. We can summarize Hyperliquid's success from three pillars.

1. UX and Liquidity, it’s genuinely a product people like to use, evident in growth, user-retention and loyalty of the onchain trading audience.

2. Infra, i.e. HyperCore + HyperEVM are unique, specialized, and performant, ensuring reliable and consistent execution.

3. Lastly, HL's timing, seizing the market share and dominating the CLOB environment early on.

Hyperliquid's technical superiority is no longer up for debate. The question is simply one of velocity: how fast will it scale its lead position, and how will it keep reshaping expectations for what onchain exchanges can deliver

For now, the throne belongs to Hyperliquid. The CLOB king.

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The content provided in this article is for educational and informational purposes only and should not be construed as financial, investment, or trading advice. Digital assets are highly volatile and involve substantial risk. Past performance is not indicative of future results. Always conduct your own research and consult with qualified financial advisors before making any investment decisions. A1 Research is not responsible for any losses incurred based on the information provided in this article. This campaign contains sponsored content. A1 Research and its affiliates may hold positions in the projects and protocols mentioned in this article.