Hyperliquid’s HYPE airdrop breaks the mold

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Hyperliquid, the largest perpetuals DEX by trading volume, launched its HYPE token today to (nearly) wide acclaim.

The HYPE airdrop stands out for two reasons. 

For one, 31% (310 million) of the HYPE token supply is being airdropped, far higher than the average airdrop of a 5% to 15% token supply range. Secondly, Hyperliquid is unique as a non-venture-backed team, which means there are no private investor allocations.

In what seems to be the most successful airdrop of the year thus far, HYPE is currently trading at a $1.7 billion market cap, and a $5.1 billion FDV. For comparison, dYdX, which was early to the dedicated DEX chain game, has a valuation of $1.1 billion.

Not everyone is happy about the airdrop, which required signing up to Terms and Conditions in advance.
Source: Hyperliquid Discord

Thanks to seamless onboarding, gas-free trading, a sleek user interface and lightning-fast token listings, Hyperliquid has cemented its reputation as the premier perps DEX of 2024.

But Hyperliquid’s success comes from more than product innovations around its orderbook exchange.

Though Hyperliquid was originally a perps application on Arbitrum, it subsequently introduced a spot orderbook exchange and migrated its DEX onto a proof-of-stake layer-1 in March 2024.

The Hyperliquid L1 chain is powered by the HyperBFT consensus protocol and claims to support about 100K TPS. Unlike most other perps DEXs, Hyperliquid’s orderbook is fully onchain, earning a nickname of “onchain Binance” among its community. Others, such as Aevo, use an offchain or hybrid approach.

HYPE will likely be used for L1 staking and governance, adding to its positive perception as a “utility” token.

Since then, Hyperliquid has sought to leverage its DEX liquidity to bootstrap an entire financial ecosystem around its prized perps product.

Hyperliquid L1 features a general purpose parallelized EVM that is secured by the same consensus protocol as the L1, letting applications interact and build off the liquidity pools in its flagship perps and spot order books (this is still in testnet).

To let developers on Hyperliquid chain tap into its $2 billion+ in DEX liquidity, the team introduced “builder codes”, an onchain identifier that “lends” liquidity to applications under a fee-sharing agreement.

Taking a page out of Ethena’s book, Hyperliquid also introduced its own Hyperliquid Liquidity Provider (HLP) vaults that allowed users to participate in market making by depositing USDC and earn trading fees. As of November 2024, Hyperliquid’s HLP vaults have net a 25% annualized return. dYdX launched a similar MegaVault earlier this month.

In the past few years, dozens of perps DEXs have come and gone, but no one player since dYdX in 2022 has monopolized the sector. The perps crown subsequently rotated to GMX to Vertex and Hyperliquid today, who controls the largest market share but still fairly low at less than 30%. 

Perp dex dominance | Source: DefiLlama

The chart illustrates the shifting dominance among perpetual decentralized exchanges (perp DEXs) throughout the past 12 months.

SynFutures V3 (which does not yet have a token) and Jupiter Perpetual Exchange (JUP) followed, with 12.17% and 9.09% respectively, reflecting growing diversity in user preferences. Apex Omni and edgeX maintained notable shares, though smaller, at 6.1% and 5.71% respectively.

No doubt some of the ebb and flow in volumes is attributable to incentives for airdrop hunters seeking to maximize their future token allocations.

The decline in dominance of early players like dYdX (V4 now at 4.61%) — which conducted an airdrop in August 2021, a year before announcing the pivot to its own chain — highlights increasing competition. Newer entrants like Vertex Perps, Aark Digital, and Apex Pro captured smaller but meaningful shares, while “Others” persistently occupied between 20-30%, signifying continued fragmentation.

The reigns are short-lived, and usually comes due to fall in interest post-airdrop, yet Hyperliquid has managed to sustain usage since the conclusion of its primary six-month points campaign on May 1.

Source: Hyperliquid

Despite being one of DeFi’s most cutthroat competitive sub sectors, crypto derivatives trading is still largely dominated by centralized exchanges like Binance, with only about 3-5% of trading volumes in onchain DEXs.

For more on Hyperliquid, tap into 0x Research podcast’s episode with Hyperliquid co-founder Jeff Yan.

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