Decentralized perpetual exchange Hyperliquid, less than a year old, has surpassed major Layer 1s Ethereum and Solana in fees while expanding into a general-purpose EVM chain, signaling significant market disruption.

The Event in Detail

Hyperliquid, a decentralized perpetual exchange, has achieved significant financial performance within its first year of operation. The protocol generated $409 million in user fees over six months, exceeding Ethereum's $332 million and Solana's $233 million for the same period. It recorded an annualized fee generation of $1.317 billion and cumulative fees of $679.75 million.

This growth accompanies its expansion beyond an application-specific chain into a general-purpose EVM chain, Hyper-EVM. Launched on mainnet February 18, 2025, Hyper-EVM aims to attract a broader ecosystem of decentralized applications (dApps).

Financial Mechanics and Tokenomics

Hyperliquid's financial model is characterized by substantial revenue generation and a unique value accrual mechanism for its native HYPE token. The protocol currently channels 99% of its fees towards buying back HYPE tokens from the open market, a process designed to reduce circulating supply and create constant demand. Prior to August 30, 2025, this allocation was 97%.

The platform's cumulative perpetual volume stands at $2.626 trillion, with a 24-hour perpetual volume of $9.815 billion. Its fully diluted valuation (FDV) is reported at $55.095 billion.

The recent proposal by Paxos to launch USDH, a regulated, dollar-backed stablecoin on Hyperliquid, further integrates this buyback mechanism. Under this proposal, 95% of the yield generated from USDH's reserves, primarily from U.S. Treasury bills and repurchase agreements, will be used to repurchase HYPE tokens. These repurchased tokens will then be distributed to users, validators, and partner protocols within the Hyperliquid ecosystem.

Business Strategy and Market Positioning

Hyperliquid's strategy combines high-throughput trading infrastructure with a community-centric development model. Its on-chain central limit order book supports sub-second trades and low fees. The project adopted a "fair launch" approach, distributing 31% of its token supply, totaling 310 million HYPE tokens valued over $1.2 billion, to early users without venture capital backing. This self-funded and community-prioritized model, with 76.2% of HYPE allocated to the community, contrasts with traditional blockchain funding structures.

The expansion to Hyper-EVM positions Hyperliquid as a foundational layer for decentralized finance, offering EVM compatibility, low gas fees, and deep liquidity access. This strategic move has already attracted over 100 projects across various Web3 sectors, including DeFi, NFTs, and GameFi. Paxos's partnership further aims to transition Hyperliquid from a crypto-native platform to a broader financial platform, leveraging Paxos's global compliance and banking connectivity.

Broader Market Implications and Risks

Hyperliquid's rapid growth and innovative tokenomics could significantly impact the decentralized perpetual exchange market, potentially attracting liquidity and users from both centralized and other decentralized platforms. Its emergence as a general-purpose Layer 1, Hyper-EVM, poses a challenge to established chains by competing for developers and dApps. The 95% revenue reinvestment into HYPE token buybacks, particularly amplified by USDH's reserve yield, could establish a new precedent for value accrual mechanisms in the crypto space.

However, the project faces challenges related to its current level of decentralization. While actively working towards increased decentralization, with plans for open-sourcing node code and achieving 21 active validators by April 22, 2025, and a multi-phase full decentralization process, concerns regarding bridge risks and potential regulatory scrutiny related to Anti-Money Laundering (AML) and Know Your Customer (KYC) compliance remain. Paxos's involvement, with its emphasis on regulatory compliance across various global frameworks, aims to mitigate some of these regulatory risks and facilitate broader adoption beyond crypto-native users.