Inside Hyperliquid: How a Tiny Protocol Aimed for a Trading Revolution

On the surface, Hyperliquid resembles any other decentralized exchange. But beneath that façade lies something far more deliberate: a platform built as a statement.

No angels. No stealth taxes. No influencer campaigns.

Just code—clean, intentional, and designed to quietly reshape the market for on-chain derivatives. 

Launched in the immediate aftermath of FTX’s collapse, Hyperliquid didn’t trace its origins to Silicon Valley or a flashy crypto incubator. It was born in silence, crafted by a team of engineers and high-frequency traders, under the leadership of a founder known simply as Jeff—a figure who avoids the limelight and favors strategy over spectacle.

Hyperliquid was never meant to be “just another DEX.” From launch, its ambition was clear: to match the execution layer of a centralized exchange, but remain fully on-chain.

Today, it’s among the most dynamic projects in DeFi. But after a critical update and a near-catastrophic exploit, the central tension comes into view:

Can the protocol preserve its decentralized DNA while continuing to scale at speed?

Also trending: the JELLY incident, Ghibli-style memes, and how the crypto crowd turned crisis into lore—plus whispers from big-name CEX execs on what Hyperliquid might do next.

From Code to Chain: Where It Really Started

A Trading Engine, Sparked by the FTX Implosion

Jeff didn’t come to build a brand.

He and a few others were killing it with quant strategies on CEXs. No press, no hype—just precision and profit.

But in the final weeks of 2022, FTX collapsed. With it went billions—and the illusion of safety. That rupture didn’t just shake the space. It gave birth to a different kind of project.

It wasn’t ideological, – Jeff later explained. – It was obvious. The system failed. People needed something that wouldn’t.

Hyperliquid’s Path: From Prototype to Protocol

Initially conceived as an experiment rather than a product, Hyperliquid began testing its trading model on Arbitrum in late 2022. But the limitations of Layer 2 quickly became apparent.

By early 2023, the team deployed a custom-built Layer 1 blockchain: Hyperliquid L1, purposefully engineered to support high-frequency, on-chain trading with zero reliance on intermediaries.

What followed was the emergence of a new class of derivatives infrastructure—decentralized, fast, and exact by design.

The Anti-Startup Playbook

While the DeFi crowd obsessed over labels, leaderboards, and TVL milestones, Hyperliquid turned inward—toward the mechanics, the numbers, the code:

• ultra-low latency,
• precision execution,
• robust, usable liquidity.

We just built something people actually wanted to use. There was no playbook,

says Jeff, the architect behind the system.

And now? The protocol just logged a staggering $22 billion in daily trading. With the HYPE token gaining momentum, Hyperliquid is no longer just an alternative—it’s becoming DeFi’s new benchmark.

Built Without Capital, Launched Without Noise

Hyperliquid’s Quiet Start

Hyperliquid skipped the playbook. No early investor rounds. No token allocations for funds. No paid influencers.

They built. They launched. And people found them.

We rejected the entire growth playbook. We listen to real users, not to people who talk about what users might want,

says Jeff, keeping it simple.

HLP: Where Speed Meets On-Chain Precision

By rejecting the standard AMM formula and embracing a full on-chain orderbook, Hyperliquid broke through a ceiling many believed unshatterable:

real-time, high-frequency execution of crypto derivatives, delivered at CEX-level speed—but without the middlemen.

As of August 2024:

• It processed $4.3 billion in daily trading volume,
• handled up to 100,000 orders per second,
• offered leverage up to 50x, and supported 133 crypto assets,
• with a UX that allowed traders to access markets via Ethereum wallets or simply email logins, enabled by Privy’s secure stack.

At the core of the experience is the Hyperliquidity Provider Vault (HLP)—Hyperliquid’s central liquidity engine, built to take on risk and keep the books deep.

Anyone can plug into it. Just deposit and you’re backing the market-making strategies that keep the whole thing moving.

But this wasn’t just a set-and-forget contract. The system was about to get stress-tested—for real.

A Protocol With No Trade-Offs

Far beyond just being a performant DEX, Hyperliquid is matured into a comprehensive on-chain financial system.

In March 2024, it launched spot trading natively and introduced two token standards:

1. HIP-1, which allows users to mint custom tokens on-chain.
2. HIP-2, which ensures those tokens have instant liquidity via embedded mechanisms within the protocol.

April 2024 saw the first implementation of HIP-1: PURR, a memecoin minted as a playful experiment. It may have been a joke—but the mechanism functioned flawlessly.

Shortly after, Hyperliquid introduced trader vaults—structured environments where users can deposit as little as 100 USDC to follow the strategies of top-performing traders.

Social trading, finally done right—transparent, permissionless, and on-chain.

This wasn’t feature farming. Hyperliquid has a thesis: build for real users, and build with direction.

Every release pushes DeFi forward—not just in tech, but in usability.

So what makes Hyperliquid one of the top protocols in the space?

We break down what’s under the hood: the mechanics, the edge, and the on-chain derivatives platform setting a new bar.

HyperEVM Launches on Hyperliquid Layer 1

Programmability Meets Performance

In February 2025, Hyperliquid released HyperEVM, an integrated Ethereum-compatible execution layer that runs directly within Hyperliquid’s L1 protocol.

Unlike traditional sidechains, HyperEVM blocks are processed as native components of L1 consensus, secured by HyperBFT and retaining the protocol’s high-speed performance profile.

The gate is open: developers can now write and deploy smart contracts natively within Hyperliquid, bringing full programmability to the protocol—while maintaining low-latency architecture.

Already, the platform enables fluid spot transfers between HYPE and HyperEVM-based HYPE, and introduces WHYPE, the canonical contract anchoring system logic across the evolving ecosystem.

The Base Layer for Next-Gen DeFi

For developers, this unlocks full composability—with smart contracts running natively within the trading environment.

For traders, it’s the integration of execution and infrastructure into a single, seamless layer.

The long-term objective is clear:

To relocate every layer of the financial stack—not across chains, but into a unified, high-throughput foundation.

With this release, Hyperliquid moves beyond trading. It becomes a new kind of DeFi infrastructure.

JELLYJELLY Attack: When a Whale Went for the System

A Strike at the Heart of the Protocol

As Hyperliquid entered its next phase of growth, it encountered its most critical stress test.

In March 2025, an anonymous whale executed a complex position-based exploit:

1. Step one: accumulate a substantial spot position in JELLYJELLY.
2. Step two: open a $8 million short, leveraging it 20x, against the same token.

Hype kicked in fast: JELLYJELLY landed on Binance and OKX, and the trader pounced.

1. Whale started scooping it on CEXs, pushing the price up 500%.
2. That short on Hyperliquid? Wrecked. Liquidations hit like a wave.

The burden of the collapsing short fell entirely on the shoulders of HLP—the vault engineered to buffer volatility and absorb structural risk.

Losses swelled to $13.5 million—unrealized, but looming. And the line was drawn: at $150 million, the entire vault would unravel.

Check this out: ZachXBT Uncovers Hyperliquid Whale Behind $20M in Illicit Crypto Profits 

The Cut That Saved the Vault

In a move as sharp as it was sudden, the Hyperliquid team delisted the JELLYJELLY perpetual and liquidated all open positions at a forced rate of $0.0095—well below market.

It worked. The HLP vault was spared, and even turned a $700,000 profit.

But the air wasn’t clear:

• Why was 20x leverage allowed on a high-volatility token?
• And how did risk protocols fail to model this attack vector?

Hyperliquid clapped back with a security overhaul:

• Stricter token listing requirements,
• Lower leverage on major pairs,
• Live surveillance to catch sketchy moves before they spread.

But skeptics weren’t quiet.

If this is DeFi, why does it feel so… managed?

HYPE plunges 18%: What triggered the drop, and what does it mean for Hyperliquid’s architecture? Full postmortem inside.

At the Edge: Hyperliquid and the Fracture of the Ideal

Hyperliquid is approaching an architectural inflection point. It delivers on throughput, uptime, and protocol depth.

With the launch of HyperEVM, native smart contract execution is now a core layer. Vaults enable yield strategies. Its custom HIP token standards are expanding DeFi’s design space.

Still, the recent disruption showed where the system remains exposed: in the delicate balance between decentralized protocol logic and human-driven intervention.

It remains true to its founding DeFi principles—efficiency without sacrifice, order within a decentralized framework.

Yet Hyperliquid’s future will not be shaped by architecture alone, but by conviction in its governance and clarity in its choices.

Born in quiet resistance to a loud, narrative-fueled world, the platform now finds itself at the center of its own story.

Will this young DEX ascend as a new pillar of on-chain derivatives—or slip into the archive of forgotten ambition?

The trials ahead will write that ending.