What is Behind Hyperliquid’s Growth?

Hyperliquid started as a decentralized perpetual exchange on Arbitrum, providing a trading experience similar to centralized exchanges while maintaining the benefits of a decentralized platform. They now have a vision to develop an onchain open financial system, starting with Hyperliquid L1, where every interaction, whether an order, cancellation, or settlement, is executed onchain. So Hyperliquid has expanded from a trading product to building its own ecosystem, optimized for high performance and scalability. 

Since its launch last year, Hyperliquid has been consistently ganging TVL and hitting new volume numbers. It is now among the top four derivatives platforms with a TVL of $415 million, behind GMX, Jupiter, and dYdX. The protocol is now processing more than a $1 billion daily volume and has cumulatively processed $230 billion in volume so far.

One of the main drivers of its recent growth has been the introduction of a new points program, unveiled in May, which has attracted many users to the platform. The team has been distributing 700,000 points weekly for over four months to reward its early users and move past the perpetual DEX image to a Layer 1 network.

Another strong reason Hyperliquid is gaining attention is the team building the protocol. The founders are experienced developers who have a deep understanding of blockchain networks. They have not raised any external funding, and the project has been bootstrapped since inception. The focus has been community engagement, transparency, and agility in listening to feedback and implementing changes.

Due to this points program and the team's confidence, the protocol gained a massive user base of 155,364 in a short period of time and is consistently growing.

One of the other interesting things in this ecosystem has been the launch of the PURR meme token as a test for the HIP-1 token standard for the Hyperliquid L1 network. It was used to stress test the spot market system, and PURR has no utility besides being a proxy for the HYPE token, the native token of the Hyperliquid blockchain. It also served as a test for the automatic liquidity provision mechanism, helping the team identify and fix issues before opening the platform for other projects.

PURR has a total supply of 1 billion, out of which 50% was distributed to early users of the DEX, and the remaining 50% was initially allocated for liquidity. From this liquidity pool, 40% was burned based on community feedback, and only 10% now remains as permanent liquidity in the PURR/USDC pair.

The team wants to complete certain goals before launching its token. The pseudonymous founder of the protocol, Chameleon Jeff, mentioned three main goals before distributing its token. They are deploying the native EVM, seamlessly integrating it with existing native components, and fully decentralizing the network (not sure how this would occur). So, they are doing another round of points and stalling the token launch. If they prove to the market that Hyperliquid is a valuable L1, their token will naturally be valued much higher at launch.

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